Champions of decentralization often argue that decentralization reforms have the potential to achieve a more inclusive and efficient public sector. This notion is based on the assumption that local governments—being closer to the people—are more accountable and responsive to their constituents than government units that are larger and further removed from the citizens. In slightly different terms, there is a general expectation that the risks and costs of central elite capture exceed the inefficiency and inequity caused by local elite capture.
This assumption, of course, is subject to being tested and verified.
A recent paper in the journal Comparative Political Studies (2024) investigates the impact of centralization on public service provision in Taiwan, focusing on how elite capture and institutional design shape governance outcomes. The paper contributes to the broader debate on decentralization versus centralization by analyzing a rare partial rollout of municipal reform that reversed administrative, fiscal, and political decentralization. Using a difference-in-differences (DiD) design, the author finds that centralization reduces public goods provision, especially for services requiring active local government involvement.
Context and Motivation
Since the 1980s, decentralization has been widely promoted by international agencies as a means to improve governance and service delivery. Proponents argue that decentralization enhances proximity, responsiveness, and accountability. However, critics caution that it can also empower local elites to capture resources and manipulate governance processes. Taiwan’s recent municipal reform offers a unique opportunity to empirically test these competing claims.
Two tiers of local governments exist in Taiwan that are subordinate to the central government. In the first tier, special municipalities, provincial cities, and counties horizontally separate into the executive and legislative branches. Local citizens can elect their own mayors and representatives, who have the power to oversee the executive branch and deliberate on budget and policy proposals. The second tier consists of townships and districts. While townships are the sub-units of counties with local self-governing status, districts are merely the administrative sub-units of special municipalities or provincial cities.
A 2010 municipal reform triggered a partial rollout of centralization in Taiwan. This reform did not transfer any power from local governments to the central government; instead, it involved a reorganization of upper-tier local governments and a transfer of resources and powers between lower and upper tiers of local government. The reform also entailed a reorganization of the sub-units (townships) under the former counties, resulting in their switch from townships to districts (sub-units of special municipalities). Since township governments have the power to perform decentralized functions, while district offices do not, this switch naturally ended the decentralized governance functions long performed by the former townships.
While the reform did not centralize power to the national level but rather consolidated authority within sub-national hierarchies, it nonetheless achieved “comprehensive centralization” by reversing all three dimensions of decentralization—administrative, fiscal, and political. This makes the local governance reforms in Taiwan an ideal case for evaluating the effects of institutional change.
The researcher employs a difference-in-differences approach, comparing treated and untreated jurisdictions before and after the reform. The non-uniform rollout of centralization allows for credible causal inference.
Key Findings and implications
1. Decline in Service Provision. Centralization led to a significant reduction in public goods provision, particularly for services like road maintenance that require local government initiative. The loss of proximity and administrative responsiveness was cited as a major factor.
2. Limited Gains in Elite-Dominated Areas. Contrary to expectations, centralization did not significantly improve service delivery in areas with high levels of elite capture. This challenges the assumption that centralization automatically curtails elite influence.
3. Mechanism: Loss of Proximity. Interviews revealed that centralization lengthened administrative processes, reducing responsiveness and weakening accountability. Local officials noted diminished capacity to address citizen needs promptly.
4. Elite Capture Measurement. The study constructs a pre-reform elite capture index using judicial data. However, the heterogeneous treatment effects show little evidence that centralization performs better in elite-dominated local jurisdictions.
By leveraging a quasi-experimental design and comprehensive reform, the study offers robust evidence on the tradeoffs between decentralization and centralization. The findings suggest that elite capture is not easily mitigated by centralization alone. Institutional design and local context matter. Taiwan’s reform contrasts with the global trend of administrative proliferation. The study cautions that amalgamation and centralization may undermine service delivery, especially in new democracies.
Broader Implications and conclusions
The Taiwan case resonates with debates in both developing and developed contexts. While decentralization is often seen as a path to democratization and improved governance, the study’s findings highlight the fragility of proximity-based advantages. At the same time, centralization may offer theoretical benefits (such as greater efficiency due to scale), but in practice, centralized solutions can erode responsiveness and efficiency.
Moreover, the study underscores the complex interplay between institutional reform and elite behavior. Simply restructuring governance hierarchies does not guarantee better outcomes. Policymakers must consider how reforms affect local accountability, administrative capacity, and citizen engagement.
The study provides compelling evidence that centralization—despite its promise to curb elite capture—can diminish public service provision by weakening local responsiveness. The study challenges simplistic narratives about institutional reform and calls for a more nuanced understanding of decentralization’s benefits. For scholars and policymakers alike, Taiwan’s local government reform experience offers a cautionary tale: governance reforms must be tailored to context, not just theory.
Read the full article (Open Access):
Wang, H. Y. (2023). Centralization, Elite Capture, and Service Provision: Evidence From Taiwan. Comparative Political Studies, 57(1), 32-68. https://doi.org/10.1177/00104140231169023 (Original work published 2024)
