This question often challenges many development policy advisors when they suggest ways to improve human development in low- and middle-income countries. The common belief is that transferring government responsibilities to poorly educated local authorities is likely to lead to failure. However, before discussing the pros and cons of this approach, it is important to define some key terms. Decentralization is the process of shifting administrative and/or budgetary authority from the central government to local municipalities. When the central government controls decision-making and budget allocations, it becomes difficult to address local needs effectively. Studies measuring decentralization’s outcomes have yielded inconclusive results, possibly because decentralization depends on how it is implemented. Below, I will explore the different types of decentralization and their potential role in either supporting or hindering the human development process.
High literacy rates are not a necessary precondition for successful government decentralization. As a matter of fact, the decentralization of government decision-making can improve literacy rates, as municipal governments tend to be more responsive to local needs. However, the success rate depends on both the type of decentralization implemented and the foundational financial and structural work done at the municipal level to prepare for project management. Furthermore, we find that highly decentralized government structures work well even in advanced economies where literacy rates are very unevenly distributed, as is the case in the US.
As previously explained, several types of decentralization execution influence the range of authority that municipal actors have to respond to local needs. Below is a list of different decentralization approaches:
De-concentration: maintains centralized control and budgeting by transferring some administrative authority to lower levels within central government agencies. It allows limited discretion for local agents to plan or carry out local programs or projects.
Delegation: indirectly influences decision-making by assigning managerial responsibility and specific functions to organizations outside the centralized structure.
Devolution: creates or strengthens sub-national units of government, such as municipalities or states, that operate largely outside the control of central government. This is accomplished through the reallocation of tax revenue from the central government to local authorities.
Privatization is the divestiture by the government of functions that are transferred to a voluntary organization in the private sector.
The main reason evidence on the effectiveness of decentralization is inconclusive is how it is implemented. Therefore, comparing the effects of two completely different types of decentralization is like comparing beans to bananas.
Assuming that decentralization is implemented through devolution, we have plenty of evidence that literacy rates improve over time compared to improvements under centralized government administration. The main reason behind this change is the advantages of decentralizing government. When municipalities are empowered to plan and administer budgets and projects, minorities are better represented, and political accountability is improved because local representatives change more often than central governments. Additionally, the quantity and quality of services improve, and it can also overcome ethnic and sectarian divisions as actors work together towards a solution. Although decentralization can also lead to local elites capturing the government, increased rent-seeking behavior, and contribute to failure in intergovernmental coordination, causing macroeconomic instability.
Bolivia (Klein 1993, 237) and Colombia (J-P. Faguet) are two examples where decentralization led to increased literacy rates across cities, especially in those with the lowest literacy levels. In Bolivia, for instance, the central government allocated budgetary funds to three main cities, but after decentralization, these funds were distributed on a per-capita basis. While the central government focused on investing in transport infrastructure, local governments prioritized education, sanitation, and urban development. The central government invested in physical capital, whereas municipalities invested in human capital. Similarly, in Colombia, the results were quite comparable after decentralization. However, they employed a phased approach to the transition, starting with strengthening local governments and establishing fiscal frameworks. They then worked on ensuring accountability in local elections, culminating in social reforms that increased municipal responsibilities for service delivery and social investments. In this case, institutions played a crucial role in defining the roles and responsibilities of local versus central government and steering the focus toward human development rather than just economic growth. Neither Bolivia nor Colombia had high literacy rates initially, but these rates improved with the appropriate form of decentralization.
In the US, for example, we can see states with very high literacy rates like Massachusetts (90%) and others with lower rates like California and New York (where the rate hovers around 78%). Additionally, the literacy rate varies significantly among different ethnic groups. In New York, for example, 25% of the population—mostly immigrants—are unable to read or speak English, and a large percentage of those who do speak English have not finished high school. However, this does not hinder decentralized state and local governments from effectively responding to the evolving needs of their populations and gradually improving literacy rates.
In conclusion, empirical data suggest that high literacy rates are not a precondition for decentralization to work effectively in improving educational level and minority representation. We see that success is defined by the type of decentralization executed to achieve the objectives it pursues. For instance, if the state aims to defer responsibility for providing certain utilities, regardless of the outcome for consumers, privatization is the easiest way to execute decentralization. It would be considered successful in terms of the objectives set by the actors. However, if autonomy and human development improvements were the objective, then perhaps devolution would be the best approach suited to achieving this.
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