In the Shadow of Administrative Decentralization: The Impact of Devolution on Subnational Service Provision

• Published date: 01 October 2023
• DOI: http://doi.org/10.1177/02750740231185849
• Author: Yiran Li,Shuo Chen,Yaohui Peng
• Date: 01 October 2023
• Subject Matter: Articles

In the Shadow of Administrative

Decentralization: The Impact

of Devolution on Subnational

Service Provision

Yiran Li

1

, Shuo Chen

2

and Yaohui Peng

3

Abstract

Decentralization is often regarded as a panacea for achieving good governance. Yet few studies have explored how devolution

(to subnational governments) affects policy agendas. In this article, we investigate how devolution affects two aspects of public

service provision—economic growth and environmental protection based on the experience of China. The results show that

the devolution simultaneously promotes local economic development and damages the environment. These mixed effects can

be attributed to the administrative mechanism of the interaction between devolution and the distribution of government

attention, which is more concerned with outcomes that can be observed in the short run rather than the long run. Our

results highlight the complexity of governance and demonstrate the architecture for an effective policy framework design.

Keywords

administrative decentralization, devolution, economic development, environment, China

Introduction

As the main component of the new public

management (NPM) movement, decentralization is often

regarded as a panacea for achieving good governance and

sustainable development. A lot of countries around the

world have implemented decentralization reforms over the

past 50 years, including both developed countries and devel-

oping countries (Cheema & Rondinelli, 2007; Osborne &

Gaebler, 1993; Rondinelli, 1981). Prior studies have argued

that decentralization can make bureaucracies more eff‌icient,

promote government accountability, empower communities,

and facilitate responsiveness (Hood, 1991; Pollitt, 2007).

Previous research in the f‌ield focuses on how the f‌iscal

resource allocation undertaken as part of decentralization

reforms affects public goods provision (Alonso et al., 2015;

Bardhan, 2002; Bird & Vaillancourt, 2008). As the key

policy toolkit used to conf‌igure governance systems with

shared or overlapping policy responsibility among several

levels of government, decentralization is also closely

related to the priority of government works—policy

agendas. Yet the effects of decentralization on policy

agendas—particularly how devolution (to subnational gov-

ernments) inf‌luences the distribution of policies—have

been largely overlooked.

In this article, we investigate the effects of administrative

decentralization on policy agendas using China’s counties

authority expansion (CAE) reform from 2000 to 2010 as a

quasi-natural experiment. We focus on the effects of devolu-

tion on the two most representative aspects of public service

provision—economic growth and environmental protection.

We show that China’s devolution reform simultaneously pro-

moted local economic development and damaged the local

environment. Such mixed effects can be attributed to the

administrative mechanism for the interaction between devo-

lution and the distribution of government attention: devolu-

tion reform gives more discretionary decision-making

power and autonomy to local governments. China’s political

tournament system incentivizes local governments to pay

more attention to policies whose effects can be easily

observed in the short run such as economy-oriented policies,

but to pay less attention to those whose effects need to be per-

ceived in the long run such as environmental protection.

Therefore, devolution provides local governments more

room to pay attention to policies with highly visible effects.

1

Department of Government and International Studies, Faculty of Social

Sciences, Baptist University Road Campus, Hong Kong Baptist University,

Kowloon Tong, Hong Kong

2

Department of Economics, Fudan University, Shanghai, China

3

Department of Economics, Fudan University, Shanghai, China

Corresponding Author:

Shuo Chen, Department of Economics, Fudan University, 600 Guoquan

Road, Shanghai, China.

Email: cs@fudan.edu.cn

Article

American Review of Public Administration

2023, Vol. 53(7-8) 280–295

© The Author(s) 2023

Article reuse guidelines:

sagepub.com/journals-permissions

DOI: 10.1177/02750740231185849

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We then explore how local governments pay attention to

both kinds of policies. We show that county governments

that have implemented devolution reforms promote eco-

nomic growth by increasing capital construction expendi-

tures and attracting more enterprises to invest. Yet such

reforms aggravate environmental pollution, for example, by

increasing waste gas emissions. The impact is more serious

for pollutants with large spillover effects, indicating the

need for cross-regional collaboration.

This article contributes to the literature in three ways.

First, prior research on decentralization mainly focuses on

how it affects capacity building and f‌iscal resource allocation

(Bird & Vaillancourt, 2008; Rondinelli et al., 1983). We

know little about its effects on policy agendas. Past f‌indings

have demonstrated that the effects of decentralization are not

as well as expected and often fail to meet the local needs and

“closer to the citizens”(Pollitt, 2007, p. 393). The mixed

effects indicate the second face of power and the complexity

of decentralization reforms. It is not simply a choice between

either decentralization or centralization. Considering its inter-

action with other dimensions such as government attention is

also necessary.

Second, the f‌indings enhance our understanding of public

policy agenda setting, especially the way in which decentral-

ization reforms inf‌luence how local governments allocate

their attention to competing issue areas. Previous scholars

have observed that public policies are subject to incremental-

ism and are periodically disrupted by rapid or dramatic

realignment (Baumgartner & Jones, 1991, 2002; Jones &

Baumgartner, 2005; Lindblom, 1959). This is because gov-

ernment attention allocation is affected by bounded rational-

ity and institutional friction inherent to decision-making

(Jones & Baumgartner, 2012; Jones et al., 2009). This

strand of the literature mainly focuses on policies’budgetary

allocation rather than outcomes, takes institutional friction as

static rather than volatile, and neglects the effects of friction

among various levels of government and competing policy

goals during the policy implementation process. This article

sheds light on the actual effects of decentralization—a

reform intended to reduce institutional friction among

various levels of government—and how it shapes the priori-

tization of government attention.

Third, this article contributes to the literature on the rela-

tionship between devolution and collaboration. In an era of

devolution, collaboration is regarded as an effective tool for

governments to promote public service delivery (Mullin &

Daley, 2009). Most such research has focused on the

effects of devolution on public–private partnerships and

intergovernmental collaboration within multilayered bureau-

cracies (Cohen, 2001; Kettl, 2000; Silvestre et al., 2018).

This article suggests that for certain complex public policy

problems such as environmental policies, devolution may

hinder horizontal intergovernmental collaboration and even

lead to a kind of “tragedy of the commons.”This may jeop-

ardize local government accountability and force us to

rethink the “environmental federalism”and their interactions

with hierarchical bureaucracies (Faguet, 2004; Oates, 2001).

The remainder of the article proceeds as follows. The next

section reviews the relevant literature. Then background

information is presented, and the research design is

described. Next, the analysis and results are reported. The

f‌inal section discusses the results and concludes.

Literature Review and Hypotheses

Devolution as a Kind of Administrative

Decentralization

Decentralization refers to the transfer of power, authority,

and responsibility from higher to lower levels of government

(Cheema & Rondinelli, 2007). Over the past half-century,

decentralization has become an important aspect of sustain-

able development strategies across both developed countries

and developing countries (Rondinelli, 1981; Rondinelli et al.,

1983). It can be interpreted as an incremental process of insti-

tutional capacity building that requires local governments to

adapt to f‌it heterogeneous preferences and contexts across

countries (Cheema, 2007; Falleti, 2005; Schneider, 2003).

The practices of decentralization can be categorized into

three forms: f‌iscal, political, and administrative (Falleti,

2005).

Administrative decentralization, which highlights “mana-

gerial”skills as a key component of the NPM, focuses more

directly than other types of decentralization on facilitating the

key principles of good governance. It can be divided into four

forms based on the degree of autonomy—deconcentration,

delegation, devolution, and privatization (Cheema &

Rondinelli, 2007; Rondinelli, 1983; Schneider, 2003; for

review, see Overman, 2016). In practice, countries may

have a combination of these forms. According to Cheema

and Rondinelli (2007), deconcentration seeks to shift admin-

istrative responsibility from the center to local f‌ield units; del-

egation transfers management authority to semiautonomous

or parastatal organizations; devolution aims to strengthen

local governments by granting them the authority, responsi-

bility, and resources to provide public services and imple-

ment policies; and privatization indicates crowdsourcing

and contracting out. To varying degrees, devolution is the

only direct channel to empower local governments for polit-

ical control; it provides the greatest degree of autonomy to

local governments.

Previous research on devolution falls primarily into two

groups. The f‌irst addresses the process and drive towards

devolution initiatives (Osborne & Gaebler, 1993; Pollitt,

2015; Rodríguez-Pose & Gill, 2003), while the second

assesses the effects of devolving practices on political

control (Brinkerhoff & Johnson, 2009; Christensen &

Lagreid, 2001) or specif‌ic policy domains (Angel, 2003).

With regard to the former, in their book Reinventing

Government, which ref‌lects on innovative reforms in the

Li et al. 281