Proponents of devolution suggest that directly elected local governments are more responsive and more accountable to the people, and therefore, that devolution and having directly elected local officials should improve local public services. In contrast, those who are more cautious about devolution note that in the absence of strong local goverment capacity and strong accountability mechanisms, devolution may result in local political capture and weaker public services. A recent World Bank study by Emmanuel Skoufias, Ambar Narayan, Basab Dasgupta and Kai Kaiser (2014) explores this question of electoral accountability and local government spending by analyzing local expenditures in Indonesia.
An important policy concern in Indonesia was the fact that whereas local councils have been directly elected since the ‘big bang’ decentralization reform in 1999, the local executive (head) of the local government was not directly elected before 2004. Instead, he or she was appointed by the local council. Concerns about indirect political accountability triggered local government electoral reforms toward direct elections (Pilkada Langsung) under Law No. 32/2004. This reform made the local head more directly accountable to the people by stipulating that (s)he would be directly elected by citizens, and provided a clearer definition of the head’s political functioning.
The analysis conducted by Skoufias, Narayan, Dasgupta and Kaiser reveals that four years after the switch to direct elections of local executives, there have been no significant effects (up or down) on human development outcomes. However, the estimates of the impact of Pilkada on health expenditures at the district level suggest that directly elected district officials may have become more responsive to local needs at least in the area of health.
The study notes that the composition of district expenditures changes considerably during the year and sometimes the year before the elections, shifting toward expenditure categories that allow incumbent district heads running as candidates in the direct elections to gain voter support. The study further finds that electoral reforms did not lead to higher revenue generation from own sources and had no effect on the budget surplus of districts with directly elected heads.
Skoufias, Emmanuel; Narayan, Ambar; Dasgupta, Basab; Kaiser, Kai. 2014. Electoral accountability and local government spending in Indonesia. Policy Research working paper ; no. WPS 6782. Washington, DC: World Bank Group.