International Business Environments

International Business Environments

Executive Summary

The success of efforts to decentralize governance responsibilities hinges upon the incentives of local politicians. We test this argument by studying the experiences of forestry sector decentralization in Bolivia and Guatemala. We analyze the survey responses of 200 mayors and show that local-level institutional incentives are systematically linked to variations in local politicians' interest and investment decisions in the forestry sector. Further, we find that a decentralization policy that transfers very limited decision-making powers to local governments stifles local interest in organizing resource governance activities.

Table of Contents

Executive Summary2

1. Introduction3

2. Decentralizing natural resource management: an overview3

3. Analyzing local politicians' interests3

4. The cases of Bolivia and Guatemala3

5. Data, tests, and results3

(a). Dependent variables3

(b). Independent variables3

(c). Regression results3

6. Conclusion3

References3

List Of Figures

Figure 1. The national and local-level institutional influences on local politicians' decision making.

Figure 2. Results of mayors' ranking of priority sectors

Figure 3. Distribution of municipal forestry staffing (n = 200).

Figure 4: Municipal budget allocations to forestry sector activities (n = 

1. Introduction

Policymakers across the globe have turned to decentralization reforms to improve the governance of forests. Until the 1970s, central governments tended to view forest governance as a top-down affair to maximize economic development. But given the perceived failure of these top-down forestry policies, decentralized policy has become a highly touted response to the difficulties of forest governance. The logic of this recent wave of forestry decentralization reforms is that local governments can design more appropriate policies because they are more familiar with both the local environment and the needs of local users.

Some scholars and policymakers argue that decentralization will work because local communities and politicians have the specific time and place information needed to construct better policies than central governments (i.e., Hayek, 1948, Oates, 1999 and World Bank, 1988). Others indicate that decentralization operates differently depending on precisely what powers are decentralized (i.e., Cohen and Peterson, 1999, Litvack et al., 1998, Ribot, 2002 and Rondinelli et al., 1989). Still others argue that decentralization may work, but only in the context of specific institutions that include mechanisms of accountability, oversight, and resource transfers (i.e., Agrawal and Ribot, 1999, Andersson, 2003, Blair, 2000, Fiszbein, 1997, Gibson and Lehoucq, 2003 and Larson, 2002). Studies using relatively large samples of municipalities to test these hypotheses are uncommon for single-country studies and non-existent for multi-country studies. Consequently, we do not possess very much systematic evidence about one of the most significant policy innovations in the environmental arena in the past 50 years.

Building on the initial one-country studies by Andersson, 2003 and Gibson and Lehoucq, 2003, this study takes the analysis of institutional incentives for decentralized forest governance one step further by comparing the dynamics of municipal politics in two different countries. This allows us to explore whether these conditions are country specific or operate at a more general level. Another advantage of such a comparative effort is the possibility to analyze the effectiveness of the contrasting institutional designs of the two countries' decentralization reforms.

We posit that one of the fundamental conditions for decentralization policies to be effective is that the local ...