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Blending Top-Down Federalism with Bottom-Up Engagement to Reduce Inequality in Ethiopia

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  • Khan, Qaiser
  • Faguet, Jean-Paul
  • Ambel, Alemayehu
Abstract
Donors increasingly fund interventions to counteract inequality in developing countries, where they fear it can foment instability and undermine nation-building efforts. To succeed, aid relies on the principle of upward accountability to donors. But federalism shifts the accountability of subnational officials downward to regional and local voters. What happens when aid agencies fund anti-inequality programs in federal countries? Does federalism undermine aid? Does aid undermine federalism? Or can the political and fiscal relations that define a federal system resolve the contradiction internally? We explore this paradox via the Promotion of Basic Services program in Ethiopia, the largest donor-financed investment program in the world. Using an original panel database comprising the universe of Ethiopian woredas (districts), the study finds that horizontal (geographic) inequality decreased substantially. Donor-financed block grants to woredas increased the availability of primary education and health care services in the bottom 20% of woredas. Weaker evidence from household surveys suggests that vertical inequality across wealth groups (within woredas) also declined, implying that individuals from the poorest households benefit disproportionately from increasing access to, and utilization of, such services. The evidence suggests that by combining strong upward accountability over public investment with enhanced citizen engagement on local issues, Ethiopia’s federal system resolves the instrumental dissonance posed by aid-funded programs to combat inequality in a federation.

Suggested Citation

  • Khan, Qaiser & Faguet, Jean-Paul & Ambel, Alemayehu, 2017. "Blending Top-Down Federalism with Bottom-Up Engagement to Reduce Inequality in Ethiopia," World Development, Elsevier, vol. 96(C), pages 326-342.
    • Handle: RePEc:eee:wdevel:v:96:y:2017:i:c:p:326-342
    DOI: 10.1016/j.worlddev.2017.03.017
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    Cited by:

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    4. Jean-Paul Faguet & Qaiser Khan & Devarakonda Priyanka Kanth, 2021. "Decentralization’s Effects on Education and Health: Evidence from Ethiopia," Publius: The Journal of Federalism, CSF Associates Inc., vol. 51(1), pages 79-103.
    5. Qing Yang & Yan Song & Yinying Cai, 2020. "Blending Bottom-Up and Top-Down Urban Village Redevelopment Modes: Comparing Multidimensional Welfare Changes of Resettled Households in Wuhan, China," Sustainability, MDPI, vol. 12(18), pages 1-23, September.
    6. Qing Yang & Chaozheng Zhang, 2023. "How Does the Renewal of Urban Villages Affect the Resettled Villagers’ Subjective Well-Being? A Case Study in Wuhan, China," Land, MDPI, vol. 12(8), pages 1-22, August.
    7. Bethlehem A. Argaw, 2017. "Regional inequality of economic outcomes and opportunities in Ethiopia: A tale of two periods," WIDER Working Paper Series wp-2017-118, World Institute for Development Economic Research (UNU-WIDER).

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    Keywords

    inequality; local government; participation; decentralization; Ethiopia; Africa;
    All these keywords.

    JEL classification:

    • N0 - Economic History - - General

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