Local governments in developing countries are vital for providing public services that improve lives and tackle issues like extreme weather, failing infrastructure, and unemployment. But many struggle to run cost-effective programs that meet the varied needs of their citizens, especially in areas with large economic and social divides.
A recent study by the University of Notre Dame looked at how inequality affects local governments in Chile, a country with one of the widest income gaps in the world. The study asked whether national policies could help reduce the harm that inequality causes to public services.
Stark limits
The findings were stark. Inequality limits what local governments can do, creating a cycle of scarce resources, reduced capacity, and falling public satisfaction. “Policies work best when they give local leaders some autonomy and a role in decision-making,” the researchers said.
The study analyzed data from 56 local governments in Chile between 2000 and 2014, using citizen satisfaction surveys to measure performance. It compared two approaches: top-down programs designed by the national government and bottom-up programs that respond to local needs. Of four major national programs aimed at reducing inequality, only one improved satisfaction with public services. The others had little effect—or made things worse.
As inequality grew, public satisfaction with local services fell. People in poorer areas felt this most keenly, while wealthier citizens, who depend less on public services, were less affected. Resource shortages, inadequate staff, and crumbling infrastructure made it even harder for local governments to meet their communities’ needs. National investments in public services, though significant, often failed to narrow these gaps.
Funding isn’t enough
The study shows that simply increasing funding isn’t enough to address the challenges inequality creates for local governments. “Carefully designed policies and stronger local governance are key to improving public services and breaking the cycle of inequality,” the researchers concluded.
Chile’s experience offers lessons for other countries. Without smarter policies, inequality will continue to undermine the ability of local governments to serve the people who need them most.
