Aid and the Role of External Influence in Polycentric Institutions




Palagashvili, Liya

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How can government leaders be made more accountable to their citizens? Polycentricism and federalism are often used as examples of institutional structures that align the interest of political leaders with that of citizens and thereby facilitate better "governance" services. I extend the framework by Vincent and Elinor Ostrom on polycentricism and analyze how the mechanisms inherent in these structures can break down. First, this can occur through external funds softening the budget constraint of local governance providers and severing the link between the providers of governance service, the customers paying for the service, and the recipient of the payments. Second, this can occur when external aid or influence reduces political competition between governance providers through limiting the supply of governance service providers or increasing the costs of voice and exit. Softening the budget constraint and reducing political competition thus alter the incentives of government actors to provide better-quality governance. I apply this framework to understanding how such things as federal (central government) aid to localities, colonial rule, and any other forms of external influence or aid can weaken these mechanisms and thus lead to lower quality of governance services. The first essay introduces the concept of polycentricism and argues that because of the nature of my inquiries, the most appropriate way to analyze these questions is this through the use of case studies and/or fieldwork. The second essay applies the framework and examines how federal funds to local police departments in the United States broke down the mechanisms inherent in community-policing solutions. The third essay identifies the mechanisms by which colonialism severed the link that aligned the incentives of government to its citizens in West African chiefdoms. The fourth and last essay concludes and provides further areas of application by discussing foreign aid to developing countries and European Union aid to its member states as preliminary case studies using this framework.



Economics, Aid, Development Economics, Federalism, Institutions, Political Economy, Polycentricity