Does Fiscal Decentralization Dampen All Ethnic Conflicts? The heterogeneous Impact of Fiscal Decentralization on Local Minorities and Local Majorities

Tranchant, Jean-Pierre (2010): Does Fiscal Decentralization Dampen All Ethnic Conflicts? The heterogeneous Impact of Fiscal Decentralization on Local Minorities and Local Majorities.

Abstract

Fiscal decentralization is widely proposed as an efficient means to accommodate ethnic violence. Yet while most of the econometric cross-country studies supports this view, case studies offer mixed results. In this paper, it is argued that this is partly due to the fact that fiscal decentralization exerts a heterogeneous impact across ethnic local majorities and minorities, both types of groups being regionally concentrated. The main argument in favour of fiscal decentralization is that by politically and fiscally empowering the local communities, these are enabled to allocate public spending in a way that is closer to their preferences. This paper hypothesises that such an empowerment mechanism, while relevant for local majorities, is likely to perform poorly for local minorities as they are not in a dominant position locally. This might feed ethnic violence as local minorities mobilize to obtain administrative regions in which they would control the decentralized policy. Similarly, fiscal decentralization could fuel communal violence as politically marginalized ethnic minorities clash against powerful local majorities. The article also hypothesises that the concern expressed by sceptics that fiscal decentralization undermines national cohesion and encourages secessionism is more acute for local majorities than for local minorities as the latter are usually too small to credibly envisage independence. Such hypotheses are discussed in the paper and then empirically tested on a panel dataset of ethnic local majorities and minorities across the world on the period 1985-2001. The main results are that i) fiscal decentralization does not encourage secessionism but on the contrary dampen rebellion of local majorities but, ii) fiscal decentralization fuels rebellion of local minorities, iii) fiscal decentralization reduces communal violence for both local majorities and minorities. As a result of its heterogeneous impact, the article calls into question the relevance of relying on fiscal decentralization to manage ethnic violence.

• Item Type: MPRA Paper
• Language: English
• Keywords: Ethnic conflict; fiscal decentralization; panel data
• Subjects: H - Public Economics > H7 - State and Local Government ; Intergovernmental Relations > H70 - General; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D74 - Conflict ; Conflict Resolution ; Alliances ; Revolutions

References

Alesina, Alberto., Arnaud Devleeschauwer, William Easterly, Sergio Kurlat & Romain Wacziarg. 2003. “Fractionalization.” Journal of Economic Growth 8(2):155–194.

Bakke, Kristin & Erik Wibbels. 2006. “Diversity, Disparity, and Civil Conflicts in Federal States.” World Politics 59(1):1–50.

Bardhan, Pranab. 2002. “Decentralization of Governance and Development.” Journal of Economic Perspectives 16(4):185–205.

Bird, Richard M. & Francois Vaillancourt. 1998. Fiscal Decentralization in Developing Countries. Cambridge: Cambridge University Press.

Bjorvatn, Kjetil & Alexander W Cappelen. 2003. “Decentralization and the Fate of Minorities.” CESifo Working Paper No. 1032.

Brancati, Dawn. 2006. “Decentralization: Fueling the Fire or Dampening the Flames of Ethnic Conflict.” International Organization 60(Summer):651–685.

Bunce, Valerie. 1999. Subversive Institutions: The Design and the Destruction of Socialism and the State. Cambridge: Cambridge University Press.

CIDCM. 2009. “Minorities at Risk Project.” College Park, MD: Center for International Development and Conflict Management. Retrieved from http://www.cidcm.umd.edu/mar/.

Cohen, Frank S. 1997. “Proportional Versus Majoritarian Ethnic Conflict Management in Democracies.” Comparative Political Studies 30(5):607–630.

Cornell, Svante E. 2002. “Autonomy as a Source of Conflict: Caucasian Conflicts in Theoretical Perspective.” World Politics 54(2):245–276.

Diprose, Rachael. 2008. “Passing on the Challenges or Prescribing Better Management of Diversity? Decentralisation, Power Sharing and Conflict Dynamics in Central Sulawesi, Indonesia.” Conflict, Security and Development 8(4):393–425.

Green, Elliot. 2008a. “Decentralization and Conflict in Uganda.” Conflict, Security and Development 8(4):427–450.

Green, Elliott. 2008b. “District Creation and Decentralization in Uganda.” Crisis State Working Paper 24.

Gurr, Ted Robert. 2000. People Versus States. Washington, DC: United States Institute of Peace Press.

Hardgrave, Robert L., Jr. 1993. “India: The Dilemmas of Diversity.” Journal of Democracy 4(4):54–68.

Hechter, Michael. 2000. Containing Nationalism. Oxford: Oxford University Press.

Hooghe, Liesbeth. 2004. Belgium: Hollowing the Center. In Federalism and Territorial Cleavages, ed. U.M. Amoretti & N. Bermeo. Baltimore, MD: Johns Hopkins University Press.

Horowitz, Donald L. 1991. A Democratic South Africa? Constitutional Engineering in a Divided Society. Berkeley, CA: California University Press.

International Monetary Fund. 2001. “Governement Financial Statistics.” Washington, DC: IMF.

Jaffrelot, Christophe. 1997. L’Inde contemporaine de 1950 a nos jours (Contemporary India from 1950 to nowadays). Paris: Fayard chapter 12.

Kymlicka, Will. 1998. Is Federalism a Viable Alternative to Secession? In Theories of Secessionism, ed. P.B. Lehning. New York: Routledge Press pp. 111–150.

Lijphart, Arend. 1977. Democracies in Plural Societies: A Comparative Exploration. New Haven, CT: Yale University Press.

Lustick, Ian, Dan Miodownik & Roy J. Eidelson. 2004. “Secessionism in Multicultural States: Does Sharing Power Prevent or Encourage It ?” American Political Science Review 94(2):209–230.

Nordlinger, Eric. 1972. Conflict Regulation in Divided Societies. Cambridge, MA: Harvard University Center for International Affairs.

Oates, Wallace E. 1972. Fiscal Federalism. New York, NY: Harcourt Brace Jovanovich.

Roeder, Philip G. 1991. “Soviet Federalism and Ethnic Mobilization.” World Politics 43(2):196–232.

Saideman, Stephen, David J. Lanoue, Michael Campenni & Samuel Stanton. 2002. “Democratization, Political Institutions and Ethnic Conflict: A Pooled Time-Series Analysis, 1985-1998.” Comparative Political Studies 35(1):103–129.

Sambanis, Nicholas. 2001. “Do Ethnic and Non-Ethnic Civil Wars Have the Same Causes ? A Theoretical and Empirical Inquiry (Part 1).” Journal of Conflict Resolution 45(3):259–282.

Siegle, Joseph & Patrick O’Mahony. 2006. “Assessing The Merits of Decentralization as a Conflict Mitigation Strategy.” Paper prepared for the workshop on Decentralization and Democratic Local Governance, USAID, September 18-19, 2006.

Suberu, Rotimi T. 1994. The Travails of Federalism in Nigeria. In Nationalism, Ethnic Conflict and Democracy, ed. L. Diamond & M.F. Plattner. Baltimore, MD: The Johns Hopkins University Press chapter 4, pp. 56–70.

Suberu, Rotimi T. 2001. Federalism and Ethnic Conflict in Nigeria. Washington, DC: United States Institute of Peace Press.

Tranchant, Jean-Pierre. 2008. “Fiscal Decentralization, Institutional Quality and Ethnic Conflict: A Panel Data Analysis, 1985-2001.” Conflict, Security and Development 8(4):491–514.

Treisman, Daniel. 2008. “Decentralization Dataset.” available at: http://www.sscnet.ucla.edu/polisci/faculty/treisman/.

Ukiwo, Ukoha. 2006. “Creation of Local Government Areas and Ethnic Conflict in Nigeria: The Case of Warri, Delta State.” Unpublished Manuscript.

World Bank. 2003. “World Development Indicators.” Washington, DC: World Bank.