Decentralization and Water Quality: Evidence from the Re-drawing of County Boundaries in Brazil by Molly Lipscomb and Ahmed Mushfiq Mobarak :: NEUDC 2007 Papers :: Northeast Universities Development Consortium Conference :: Center for International Devel

We examine the effect of political decentralization on pollution spillovers across jurisdictional boundaries. Upstream water use has spillover effects on downstream jurisdictions, and greater decentralization (i.e. a larger number of political jurisdictions managing the same river) may exacerbate these spillovers, as upstream communities have fewer incentives to restrain their members from polluting the river at the border. We use GIS to combine a panel dataset of over 10,000 water quality measures collected at 372 monitoring stations across Brazil with maps of the evolving boundaries of the 5500 Brazilian counties to study (a) whether water quality degrades across jurisdictional boundaries due to increases in pollution close a river’s exit point out of a jurisdiction, and (b) what the net effect of a decentralization initiative on water quality is, once the opposing impacts of inter-jurisdictional pollution spillovers and increased local government budgets for cleaning up the water are taken into account. We take advantage of the fact that Brazil changes county boundaries at every election cycle, so that the same river segment may cross different numbers of counties in different years. We find evidence of strategic enforcement of water pollution regulations; there is a significant increase in pollution close to the river’s exit point from the upstream county, and conversely a significant decrease in pollution when the measure is taken farther downstream from the point of entrance. Even in the presence of such negative externalities, the net effect of decentralization on water quality is essentially zero, since some other beneficial by-products of decentralization (in particular, increased local government budgets, and possibly the creation of more homogenous jurisdictions) offsets the negative pollution spillover effects.