Abstract
AbstractFiscal decentralisation theory calls for enhanced local revenue and spending responsibilities to promote the efficiency of public service delivery. However, some have pointed to the danger of local capture cancelling out these effects. I examine the argument that organised crime violence (OCV) intensifies as mafias fight for access to local government resources, which they consider an attractive income source. I regress violence on local spending (LS) in Mexican municipalities over the period 1995–2015. I find a significant relationship between LS and the intensity of violence: higher levels of LS per capita are strongly related to higher homicide rates, conditional on them being positive. However, LS does not determine the probability of OCV taking place in the first place. The results suggest that caution should be exercised when initiating decentralisation reforms in the context of local capture and OCV.
Highlights
Over the past decades, decentralisation in its various dimensions has been implemented with great enthusiasm in many countries around the world
In order to distinguish between the occurrence and the intensity of violence, the regression analysis follows the logic of a two-part model (TPM) (Duan et al 1983)
Looking at the between-municipality effect, an increase of 1,000 Mexican pesos of spending at the local level decreases the odds of being subject to any violence by 10%
Summary
Decentralisation in its various dimensions has been implemented with great enthusiasm in many countries around the world. Tax and spending competencies are transferred to local governments in order to more flexibly respond to the true preferences of citizens with regard to public service provision (Oates 1968), to promote efficiency-improving competition for an optimal number of residents (Tiebout 1956) and to make local public service providers more accountable to taxpayers (Pierson 1995; Salmon 1987). While these reforms are being undertaken with the. Municipalities may increasingly be considered an attractive source of income themselves (Pinotti 2015a)
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