Distributive politics and decentralisation in Chile and Peru

Abstract

The paper presents evidence that decentralisation increases partisan influence in the allocation of non-programmatic resources. The model employs a panel data and fixed effects analysis using data corresponding to intergovernmental transfers from the national level, passing through the regional level and earmarked for investment for local governments in Chile (2008-2018) and Peru (2004-2013). The results indicate political influence on the distribution of resources. The distribution of resources is used tactically in both countries in presidential election years. The implementation of laws increasing political decentralisation in Chile and Peru increased the political bias in resource distribution. The results have policy implications and provide a comparative perspective on the development of fiscal institutions in both countries. In a continental scenario, in which Latin American countries are undergoing a strong decentralisation process, it is suggested to advance in reforms that increase transparency, accountability and citizen participation. In addition, it is advisable to limit non-programmatic allocations and provide stability in the distribution of public resources.