Making the Grade: Achieving Municipal Incentive Goals in Peru

• In Event: Governance and Social Services Delivery in Developing Countries

Abstract

Worldwide governments seek to improve municipal development by promoting local increased tax collection and public service delivery but countries still struggle with persisting local disparities in human development and institutional capacity. To address these disparities, Peru recently passed an innovative municipal incentive program to boost local performance in addressing human development and institutional capacity deficits. In the new Incentive Program, municipalities receive bonus transfers for accomplishing yearly goals established by the central government. Since the implementation of the program in 2015, some localities have successfully completed the targeted goals leading them to benefit financially while others have failed in meeting their goals, enlarging the local disparity gap. We explain this variation in Peruvian local performance as a function of a direct and indirect role of political competition, local capacity, and mayor’s characteristics. Findings provide important insights for local governance and results-based budgeting and incentive programs that are now spreading to other countries.

Authors

• Jami Nelson-Nunez, The University of New Mexico

• Claudia N. Avellaneda, Indiana University

• Fiorella Patricia Vera-Adrianzen