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Political Clientelism and Capital Investment Allocation to Local Governments

This paper by Rustam Romaniuc explores the impact of political clientelism on the allocation of capital investments to local governments (LGs) in Moldova. It examines how economic interests and political affiliations influence budgetary resource distribution, revealing weak regulatory frameworks and the absence of constraints on central government actions. The study highlights that about 30% of LG expenditures are capital investments, and the allocation process often serves political ends rather than public good. The paper emphasizes the need for a new regulatory framework to ensure fair and effective allocation based on competition and balanced governance.

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Political Clientelism and Capital Investment Allocation to Local Governments

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  1. Political clientelism in the allocation of capital investments to LGs: using public resources as “carrots”? Rustam Romaniuc Author: December 5, 2012

  2. What is politicalclientelism? Political institutions as a determinant of economic performances What type of clientelism matters and why? Economic interests corrupt the political process Politics corrupts economics: rents are created that could be used to secure control of the government

  3. Allocation of capital investments to LGs Capital investments represent 30% of total LGs’ expenditures However, there are weak constraints on central Government in the process of allocation of budgetary resources to LGs What is then the criterion used for allocating capital investments to LGs?

  4. Empirical observations The probability of capital investment allocations to first level local governments, depending on their political affiliation, 2012, %.

  5. Concluding remarks The missing regulatory framework gives wrong incentives to Government and Parliament When implementing a new regulatory framework, costs/benefits analysis should be applied to evaluate competing alternatives The importance of political competition and balanced government

  6. Thank you! For any further information, please do not hesitate to contact us: Rustam Romaniuc, Programs Director Independent think tank “EXPERT-GRUP” A: MD-2025, Moldova, Chişinau, str. Columna 133 T: +373 22 929 994 F: +373 22 211 599 E: info@expert-grup.org W: www.expert-grup.org

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