**_3.1. Horizontally:_** The relationship between local bureaucrats and politicians is highly contextual, but in general, literature suggests that there is tension between these two groups in regards to local revenue generation and public spending. Such tension arises from an unequal distribution of power among them and from what Fjeldstad (2002) calls a “trust deficit” in political-administrative relations. According to a World Bank research project on local organizations in India and Nepal (WB 2004b and WB 2004c) conflict often arises because of poorly defined allocations of functions between administrators and local politicians. Additionally, there are considerable differences in the levels of assets and power in these two forms of local body. In Nepal for example, one local officer commented that "it is wrong to shift responsibility of implementing agricultural programs to District Development Committees, as they currently lack adequate human, finance, and physical assets." To cope with these problems, the studies suggests the establishment of a clear set of rules for the allocation of local responsibilities, a balanced distribution of resources, and a realistic assessment of the capacities of administrators and local elected politicians to perform their mandated responsibilities.<sup>18</sup>

Concerning fiscal issues, one can argue that while administrators prefer generating enough tax revenue to cover their wage bill, politicians are less inclined to raise taxes. This is both because administrators do not have much control over the other sources of local revenue (i.e. grants, credit and aid) for covering their wages, and because politicians are interested in reelection, and raising taxes may reduce their popularity. What this suggests is that there is more likely to be coercive tax enforcement when the balance of power is in favor of the local administration, rather than of the elected officials (Fjeldstat 2002). Although the relationship between elected politicians and local administrators still requires further elucidation, a study by Schneider (2003) found that the differences in the distribution of power among these two groups affect the levels of tax collection in the local sphere. Particularly, this study found that while political decentralization is negatively and significantly associated with tax capacity (measured as taxation as a percentage of GDP), administrative decentralization does not have a significant effect on tax capacity.

Assuming that the degree of political and administrative decentralization is a good approximate of the horizontal distribution of power, Schneider's study (2003) proves empirically that tax collection goes down when power gravitates around local elected politicians.<sup>19</sup> This shows that the level of tax collection is influenced by the institutional arrangement between local elected representatives and administrators, over which citizens have little control. Because local administrators and elected officials have different objectives and spending priorities, some measures to keep them accountable to each other and to citizens must be established. This is challenging because in situations where governments are in transition to greater levels of decentralization local governments do not always receive full control over their newly transferred responsibilities. To various degrees, central governments continue to influence the local level, through line department officials. As a result, local bureaucrats are not subject to the control of citizens or elected

> 18 One particular lesson derived from this study, is that line agencies are often better equipped with technical skills than elected bodies. Thus, the allocation of local functions should take this into account.

> 19 However, the study does not provide evidence that tax collection goes up when local power is tilted in favor of local administrators.

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