normalizing by per capita GNP, is improving over time. Accountability seems to be the key to Indonesia's improving performance. Studies show that roads are maintained cost efficiently when information (on the performance of local governments) is enhanced and when there is a sharing mechanism that makes it possible to deal with observed problems (Bird, 1994:17). One study showed that local governments involve beneficiaries in road maintenance works; for example private firms maintain roads they need to get their products to the main highway. In other instances, well-defined groups of farmers who clearly benefited from road improvements were similarly carrying out routine maintenance tasks (Bird, 1994:15). In yet another, an appropriate solution appeared to lie in the imposition of explicit user charges since most road users were willing to pay. These examples show that maintenance service levels reflecting beneficiaries' demand may be established if local authorities can exercise real control over maintenance service delivery and allocate expenditures freely.

South Africa represents a better perforner than Indonesia at even a higher level of decentralization, with costs well below those of other countries in the case study except for Argentina, Germany and the USA. At very high levels of decentralization, local governments in South Africa are not as efficient in conducting road maintenance works and accounting for local demand for good road conditions.

Moving towards absolute decentralization, in the United States, performance is better than all the case study countries except Germany, after normalizing by per capita GNP. In the United States, the responsibilities for road maintenance are both functionally and fiscally decentralized with local governments having the jurisdiction to serve their areas. Our graphical analysis, directly comparing the USA to Germany, corroborates empirical evidence that roads in the United States are not in good condition after decentralization (Walzer and Chicoine, 1989:79). Furthermore, unlike the theoretical expectations that preference costs increase at extreme levels of decentralization, we see that the USA has been able to keep these costs lower than the other case study countries. This can be understood by looking at recent trends in road financing structures in the United States. Traditionally, intergovernmental aid (federal aid) has constituted a major source of revenue for state and local governments. Beginning in 1987, the federal government stopped the federal General Revenue Sharing (GRS), which was a transfer used to finance road construction and improvements. Since then, funds for road works are raised locally from general appropriations. These funds are not earmarked. This has put state and local governments in a tight budgetary position, perhaps increasing their productivity. It was predicted that the cost of bringing roads to good condition are well beyond the current fiscal capacity of most local govermnents. A survey conducted in 1987 indicated that bringing all roads in the system to an acceptable<sup>2 0</sup> performance level would cost over six times the average spending per mile by governments (Walzer et al, 1987). The actual effect has been to increase efficiency, as preference costs have not declined since 1987. A caveat is necessary at this point: some evidence suggests that 20 An acceptable level in the eye of local governments is below the desired engineering performance standards but it is consistent with local demand for the service.

21