Over the past 40 years, decentralization -- that is, central governments devolving authority and resources to democratically elected sub-national governments -- has been taking hold, to varying degrees, all over the world. It's considered a reform that holds the potential to improve the quality of governance. How has it performed in practice? We recently spoke with Jean-Paul Faguet -- a Reader in the Political Economy of Development, London School of Economics, and Chair of the Decentralization Task Force of the Initiative for Policy Dialogue at Columbia University -- about how Bolivia fared in its big bang experiment with decentralization in the mid-1990s. He says that Bolivia's overall results were quite impressive, especially for the poor. As for how decentralization (or fiscal federalism) interacts with industrial policy, he believes that such an incentive-compatible way of limiting the power of the State and the discretion of senior politicians helps boost the odds of an industrial policy succeeding.


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