Government Fragmentation and Public Goods Provision

Abstract

We investigate the effects of territorial government fragmentation on the quality of public services. We argue that an increase in the number of regional governments has two effects: (1) it redistributes fiscal and administrative resources to underserved regions and (2) encourages yardstick competition. Extreme government fragmentation, however, limits efficiency gains by reducing administrative capacity, economies of scale, and enabling capture. We test this argument using original data on the number of regional governments in sub-Saharan Africa (1960–2012). Consistent with our theoretical expectations, we find robust evidence for an initial increase in the quality of services provision following regional government splits, which levels off at high levels of regional fragmentation. Three distinct difference-in-difference analyses of microlevel, georeferenced data on health outcomes in Malawi, Nigeria, and Uganda further support our theoretical argument.