Shared Mandates, Moral Hazard, and Political (Mis)alignment in a Decentralized Economy
This paper investigates the effects of political (mis)alignment on public service delivery when mandates are shared between state and local governments. We analyze sewage treatment policies in the state of São Paulo, Brazil. Relying on difference-in-differences estimations, we establish a causal relationship between political alignment and higher sewage treatment provision. Conceptually, we find that, with uncertain local commitment and weakly enforceable local obligations, shared mandates lead to a moral hazard issue implying service under-provision. Our results show that political alignment attenuates such moral hazard effects.
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| Format: | Working Papers biblioteca |
| Language: | English |
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Inter-American Development Bank
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| Subjects: | Transparency and Anticorruption, Public Utility, Public Service, Municipal Management, Wastewater Treatment, Sewerage, Sanitation Service, Decentralization, H40 - Publicly Provided Goods: General, H54 - Infrastructures • Other Public Investment and Capital Stock, H72 - State and Local Budget and Expenditures, P48 - Political Economy • Legal Institutions • Property Rights • Natural Resources • Energy • Environment • Regional Studies, Infrastructure provision;Water and sanitary services;Moral;Political alignment, |
| Online Access: | http://dx.doi.org/10.18235/0011691 https://publications.iadb.org/en/shared-mandates-moral-hazard-and-political-misalignment-decentralized-economy |
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