Decentralized Structures for Providing Roads: A cross-country comparison
This paper – a product of the Environment, Infrastructure, and Agriculture Division, Policy Research Department – is part of a larger study in the Agriculture and Natural Resources Department to develop a Strategie for rural development. The study is funded jointly by the Norwegian and Swiss Special Studies Trust Funds and by the Bank’s Research Support Budget, under research project Decentralization, Fiscal Systems, and Rural Development (RPO 679-68). (Subscriber-only Content)
ABSTRACT: Decentralizing the responsibility for roads costs more at first, mostly through losses in economies of scale. But those losses may be outweighed by increases in efficiency when the locus of roadwork is closer to the people. Minimizing costs is often cited as essential for optimizing service delivery. Roads are the oldest, most important infrastructure services provided by governments. They require construction, rehabilitation, maintenance, and administration (planning, selection, and management). Various institutional arrangements – including the structure of decentralization – affect the degree to which costs can be minimized. Drawing on analyses of experiences with decentralized road provision in eight countries, a longitudinal analysis (over 25 years) of change in the Republic of Korea, and vertical and horizontal analysis across states and local governments in Germany, Humplick and Moini-Araghi found that the impact of decentralization varies depending on which aspect one is considering: the efficiency of producing road services or the impact on road users. Resource costs – the cost of providing roads ($/km) – are concave, increasing first and decreasing at later stages of decentralization. Preference costs – the costs to road users as a result of bad roads – are downward sloping, suggesting that road conditions improve as decentralization advances. In short, decentralization entails initial costs, mostly as losses in economies of scale. But those losses can be outweighed by increases in efficiency when the locus of roadwork is closer to the people.