Decentralisation in Africa and Fiscal Competition: Evidence from Benin

Abstract

Without denying particular dimensions of the decentralisation in Sub-Saharan countries, this paper applies standard reasoning from the fiscal federalism literature to a developing country and tests the existence of strategic interactions among local Beninese governments, called communes'. We first propose a two-jurisdiction model of public expenditure interactions, considering a constrained Nash equilibrium to capture the extreme poverty of some communes. We show that spillovers among jurisdictions involve strategic behaviours of local officials who have sufficient levels of fiscal resources. Second, by estimating a spatial lag model, our analysis provides evidence for the presence of strategic interactions in Benin, contingent on communes' fiscal autonomy. Such interactions arise among communes which are geographically or ethnically close. We also highlight both an opportunistic behaviour of local governments before local elections and an effect of partisan affiliations. This African democracy appears to be as concerned as developed democracies with strategic fiscal interactions. Cet article applique la theorie du federalisme budgetaire a l'analyse du processus de decentralisation d'un pays en developpement (le Benin) et teste l'existence d'interactions strategiques parmi les juridictions locales du Benin. A partir d'un modele de concurrence budgetaire a 2 juridictions, nous definissons les conditions d'un equilibre de Nash contraint pour capturer les effets d'extreme pauvrete de certaines communes. Nous montrons que des externalites entre communes impliquent des comportements strategiques des decideurs publics locaux pour ceux disposant de ressources budgetaires suffisantes. Ensuite, en estimant un modele d'interactions spatiales, nous montrons la presence d'interactions strategiques pour les communes du Benin, contingentes a leur autonomie budgetaire. De telles interactions emergent parmi les communes geographiquement et ethniquement proches. Par ailleurs, ces interactions surviennent dans le cadre d'un cycle electoral opportuniste de depenses publiques et sont sensibles a l'affiliation partisane des maires. En conclusion, le Benin apparait aussi touche que les democraties developpees par des comportements strategiques en depenses publiques locales.