expressed at the local level so as to produce a distribution of investment spending proportional to local needs. In fact, the study of Faguet (2000), through rigorous econometric analysis<sup>27</sup> , finds that decentralization: (a) through the application of the per-capita criterion resulted in a massive shift of resources in favour of smaller poorer municipalities; (b) changed the composition of capital spending, away from economic production and large scale infrastructure, towards education, urban development and water and sanitation; and (c) led public investment to become more responsive to local needs as illustrated by the fact that investment in education increased where literacy rates were low. Assuming a not too strong imbalance with recurrent costs, this is a positive consequence of the Bolivian reform which, however, seems to be much more the product of a deep democratization reform, combined with a clear destination and allocation rule of the resources transferred to the municipalities, than of the shared responsibility model itself. Democratization, beyond local elections, promoted the creation of civic organizations at the local level with the specific purpose of overseeing municipal spending and propose new projects (the Oversight Committees, or _“Consejos de Vigilancia”_ )<sup>28</sup> , and a participatory planning process, through the elaboration of the “Development Municipal Plan”. In fact, it is noticeable that the “voice” and “compact” relationships could be fairly well handled, more effectively than in Colombia, even within this shared model (the role of the departments was, however, still much less defined in Bolivia than in Colombia in 2000 leaving lack of clarity in the area of human resource management).

# **C. Available evidence on the “school autonomization” model**

Where more formal assessments exist is on the decentralization models that put the focus on the schools. In particular, the two decentralization experiences of Nicaragua and El Salvador were thoroughly evaluated.

# **<u>Nicaragua and El Salvador</u>**

**In Nicaragua, school-based decisions on teacher management are shown to have a positive impact on test scores. In El Salvador, enrollment in the rural areas increased massively  following EDUCO and it is shown that school-based decisions on teacher management have a positive impact on class attendance or, even, test scores. In both models, these positive results are the product of a well designed and effectively implemented “client power” relationship, accompanied by a solid “compact”.**

# **Evidence:**

> 27 More specifically, a formal test of whether decentralization changed the pattern of public sector investment in Bolivia is undertaken by decomposing investment patterns into 3 terms (a state effect, which captures all of the characteristics of a state fixed in time, a year effect, which captures year shocks and time-specific characteristics, and a decentralization-interacted state effect, which captures state-specific characteristics commencing in 1994 which were previously absent (this term captures the effects of local government, local civic associations and other local institutions that sprang up with the reform)) and performing different tests on the coefficients.

> 28 The role of civic organizations in the aggregation of preferences, representation of community needs and mediation of community participation in the production of public services, as the need for analyzing why certain civic organizations are more successful than others (the extent to which citizens are able to make local government do things for them), is particularly stressed by Faguet (2000).

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