Does decentralization change policy outputs at the local level? If so, for better or worse? Do such changes reflect deep changes in the policy-making process itself, or are they related to technical parameters in the flow of funds? Why do some local governments respond well to decentralization while others respond badly? These are some of the most important questions surrounding the issue of decentralization, which remain open despite a large related literature. This paper seeks to answer some of these questions for the remarkable case of Bolivia, through a blend of econometric analysis at the national level and detailed qualitative research into local political and institutional processes. I argue that the "outputs" of decentralization are simply the aggregate of local-level political and institutional dynamics, and so to understand decentralization we must first understand how local government works. Hence we examine what decentralization did at the national level, and then dig down into local government processes to understand how it did it
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