Decentralization: An Antidote to Corruption in Water Services? A Comparative Study of the Enabling Environment for Corruption at Different Levels of Government

Abstract

In the past two decades a common policy recommendation for improving water governance has been to shift the authority over water services to sub-national government departments. The advice to decentralize builds on principal-agent arguments and the assumption that decentralization increases citizens’ possibilities to monitor the responsible bureaucrats. However, previous research provides inconclusive results concerning the effect of decentralization on corruption levels. Moreover, how decentralization impacts the enabling environment for corruption has rarely been empirically assessed despite its importance for decisions concerning institutional reform. This paper is a first attempt to contribute to resolving the uncertainty on the link between decentralization and corruption in water services. The paper empirically tests the contradictive theoretical expectations that previous research present by quantitatively comparing the enabling environment for corruption between water utilities at national, state, municipal and village level. Using survey-data collected for this paper, ANOVA-analyses show that accountability is stronger in decentralized water utilities than centralized water utilities. The analysis also suggests, but results remain non-significant, that decentralized water utilities are less subject to monopolies, while they experience more discretion than centralized water utilities. Taking all three mechanisms into account, the paper concludes that decentralized water utilities provide a less corruption-favourable environment than centralized water utilities.