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Jean-Paul Faguet

March 17th, 2021

Decentralisation’s Contribution to Ethiopia’s Development Miracle

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Estimated reading time: 8 minutes

Jean-Paul Faguet

March 17th, 2021

Decentralisation’s Contribution to Ethiopia’s Development Miracle

0 comments

Estimated reading time: 8 minutes

Professor Jean-Paul Faguet looks at the history and contribution of decentralisation to Ethiopia’s development, and questions whether it can help explain the country’s extraordinary performance over the past generation.  

Ethiopia has been in the news for terrible reasons lately. The horrific violence now consuming the northwest of the country (see “They have destroyed Tigray, literally”) is tied up in a regional conflict with roots in the country’s deep ethnic divides. These are the same cleavages that shaped the country’s ethnic federalism – i.e. the very structure of the Ethiopian state (explained succinctly in Appendix C of this book). Paradoxically, this federal design was until recently judged highly successful in stabilizing this enormously diverse country and facilitating its rapid development. This makes the current, vicious spasm all the more tragic.

‘What went wrong?’ is a long, complex tale of imperial conquest in the past and powerful, headstrong leaders today, and beyond the scope of this post. What I do here, instead, is to rewind before the current conflict to examine decentralization and development during the two decades following the end of Ethiopia’s civil war in 1991. This story is based on a paper I wrote with Qaiser Khan and Priyanka Kanth, published recently in Publius: The Journal of Federalism.

Beginning in the mid-1990s, Ethiopia adopted a federal structure, featuring nine regional states divided along ethno-linguistic lines. In 2002 it decentralized government further, devolving authority and resources for key social services down to woreda (district) level. During this period, Ethiopia enjoyed a golden age as one of the world’s most striking success stories, with economic growth and human development progress amongst the best in the world. Hence our question here: Does decentralization help explain Ethiopia’s extraordinary development performance over the past generation?

Ethiopia: Development Miracle

With a population of 115 million divided amongst 93 mother tongues and 98 ethnicities, Ethiopia is a big, important, highly diverse country. It is also a remarkable case of development, suffering war, famine and chaos in the 1970s and 1980s, before transforming itself into one of the fastest growing economies in the world. For ten of the past fifteen years, Ethiopia sustained growth rates above 10 percent, with no year lower than 6.8 percent. Throughout this period the economy diversified rapidly. Ethiopia is also important for the policy experiment it represents: a low-income country with terrible human development indicators that both federalized and decentralized, and then saw dramatic improvements in human development.

These human development advances have been both broad and sustained. Child mortality fell from 123 per thousand in 2005 to 67 per thousand in 2016. Ethiopia achieved the MDG 4 (Child Mortality) target ahead of time, and primary net enrollment rates rose from 68 percent in 2004 to 85 percent in 2015. These development milestones are coupled with a drastic reduction in poverty. Based on official data, the population below the poverty line fell from 39% in 2004 to 27% in 2015.

Did decentralization contribute to these successes, or was it incidental? Our evidence implies that decentralization did indeed improve public education and health sector performance in Ethiopia. Specifically, decentralization to regional and woreda (district) governments led to higher net enrollment rates (NER) and improved provision of antenatal care (ANC) to women. Our methodology allows us to distinguish between the effects of greater expenditures vs. decentralization per se on NER and ANC. The expenditure effect is positive, as one would expect. But there’s a separate, statistically significant, and substantively important effect of decentralization on these outcomes that dominates the pure expenditure effect.

The magnitudes are significant: the incremental effect of decentralizing health and education service provision to the average woreda is an estimated 13% for ANC and 18% for NER. The main channel for these improvements is institutional, related to local control over education and health services, as opposed to local expenditures per se. Such effects might be supply-side, such as greater efficiency in public management, or better-informed decisions; demand-side, such as higher citizen demand for education and health services; or both, such as improved accountability of officials to citizens. With currently available data, it’s unfortunately not yet possible to disentangle these effects. Our results are robust to different data types, estimation techniques (time series, panel, diff-in-diff), and model specifications.

Future research could probe further into the institutional mechanisms by which decentralization improves service provision, and whether these vary by sector or region. But what cannot be doubted is that Ethiopia made remarkable progress in health and education during the past generation, and decentralization is an important part of that success. That this could happen in an environment of relatively low state capacity implies that decentralization is a powerful reform, and hints at its potential to improve governance more broadly.

Lastly, it’s difficult to overstate the empirical difficulties we encountered. Creating the database required years of work and a huge amount of improvisation on the part of a well-qualified research team. We’re happy to make the full database of Ethiopian subnational expenditures, social development outcomes, and other characteristics freely available. We hope future researchers will use it to investigate interesting, difficult questions on subnational development in Ethiopia.

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References


The views expressed in this post are those of the authors and in no way reflect those of the International Development LSE blog or the London School of Economics and Political Science.

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Jean-Paul Faguet

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