Decentralisation and corruption revisited: Evidence from a natural experiment

Decentralisation of powers and responsibilities from a higher to a lower level of government has been held out as an answer to a multitude of diverse political challenges. It is often assumed that as an organising principle, decentralisation reduces corruption by bringing government closer to the people. This article adds to the small literature dealing with the relationship between decentralisation and corruption by examining decentralisation of water supply from one level of sub-national government to another. It extends this literature by considering a dynamic situation and examining whether the relationship changes over time. The area of study covers the rural and semi-urban areas of two large Indian states. The study compares the level of corruption in piped water supply schemes run by centralised agencies and decentralised agencies. The study is based on experiential, not perception-based corruption measures We find that decentralisation increases corruption significantly in the immediate aftermath of decentralisation. At the same time, we observe that with time, this increase in corruption is reduced substantially, although the increase persists in the medium term. © 2012 John Wiley & Sons, Ltd.