Some authors have raised warnings against decentralization, based on the idea that regional or local bureaucracies have less capacity to initiate and implement policies than centrally appointed officials.

In fact, this observation only applies when a country plans to reform its centralized government. But many countries that have initiated such reforms were not initially centralized ones; instead, they were characterized as "partially centralized". Therefore, in their case, these warnings do not apply because, before and after the reform, regional or local bureaucracies, and thus their state capacity, are the same.

The goal of this paper is therefore to investigate how regional government's state capacity affects the trade-off between partial and full decentralization. Contrary to the common wisdom, we find that full decentralization should be preferred for low levels of regional state capacity.

Authors: Andrés Bellofatto (Tepper School of Business, Carnegie Mellon University) y Martin Besfamille (Department of Economics, Universidad Torcuato Di Tella.

Presented by Martin Besfamille, Associate Professor in the Department of Economics at Universidad Torcuato Di Tella. He holds a M.Sc. in Statistics and Economics from ENSAE and a Ph.D. in Economics from University of Toulouse 1. He taught at University of Bonn, Liège, Montevideo and San Andrés. He has been invited as research fellow at University of Brussels, Toulouse 1 and Warwick.