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Published on Nov 6, 2013
Federalism Helps Industrial Policy By Limiting Government Power
Jean-Paul Faguet Reader in the Political Economy of Development, London School of Economics
"How Industrial Policy Succeeded In Korea & Failed In Venezuela "
Over the past 40 years, decentralization -- central governments devolving authority and resources to democratically elected sub-national governments -- has taken hold to varying degrees all over the world. It's considered a reform that holds the potential to improve the quality of governance, but how has it performed in practice?
We 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.
Faguet says 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.
1. Decentralizing taking place globally 2. Bolivia shock therapy experiment with decentralization 3. Bolivian decentralizing helped the poor 4. Industrial policy in Korea versus Venezuela 5. How federalism helps industrial policy