The Economic Impact of Recentralization: A Quasi-Experiment on Abolishing Elected Councils in Vietnam

Comparative political economy offers a wealth of intriguing hypotheses connecting political decentralization to better public service delivery, improved governance, and reduced corruption. Although highly influential, recent formal and experimental work has begun to question the underlying theory and empirical analyses of previous findings. At the same time, many countries have grown dissatisfied with the results of their decentralization efforts and have begun to reverse them. Vietnam is particularly intriguing for researchers, because of the unique way it initiated its recentralization – piloting a removal of elected People’s Councils in ninety-nine districts throughout the country, and stratifying the selection by region, type of province, and urban versus rural settings. We take advantage of the opportunity provided by this quasiexperiment to test the core hypotheses beyond the decision to shift political and fiscal authority to local governments. We find that recentralization significantly improved a spectrum of public services, ranging from quality of roads to healthcare to agricultural extension. Surprisingly, however, recentralization also dramatically improved the quality of governance, especially impacting the amount of corruption experienced by Vietnamese citizens. These treatment effects offer a useful corrective to the extant literature and point to new avenues for research and policy interventions. _____________________ * We thank Jairo Acuna-Alfaro, Don Green, Yuki Ijima, Yotam Margalit, Craig McIntosh, Erik Wibbels, and seminar participants at Columbia University and Freiburg University for helpful comments