Decentralized structures for providing roads : a cross-country comparison

Minimizing costs is often cited as essential for optimizing service delivery. Roads are the oldest, most important infrastructure services provided by governments. They require construction, rehabilitation, maintenance, and administration. Various institutional arrangements affect the degree to which costs can be minimized. Drawing on analyses of experiences with decentralized road provision in eight countries, a longitudinal change analysis of Korea, and vertical and horizontal analysis across states and local governments in Germany, the authors found that the impact of decentralization varies depending on which aspect one is considering: the efficiency of producing road services or the impact on road users. Resources costs are concave, increasing first and decreasing at later stages of decentralization. Preference costs are downward sloping, suggesting that road conditions improve as decentralization advances. In short, decentralization entails initial costs, mostly as losses in economies of scale. But those losses can be outweighed by increases in efficiency when the locus of roadwork is closer to the people. The advantages or limitations of decentralization are function-specific: a) maintenance functions are best provided locally; b) to minimize resource costs, construction should be either completely centralized or completely decentralized; and c) administrative activities are more efficiently provided by local units similar to local maintenance units.