Decentralization puzzles: A political economy analysis of irrigation reform in the Philippines

In the 1970's, the Philippines embarked on a program to decentralize the management of public irrigation. Early studies have shown that these reforms led to consistently positive results and earned widespread international documentation and recognition as a role model. Twenty years later, however, an examination of the program now indicates problems of poor performance.; How could poor performance occur in a system known worldwide for its major decentralization efforts? How are the incentives faced by key irrigation players linked to performance? What factors may have influenced these incentives? These questions build on the literature of decentralization, collective action, bureaucracies, foreign aid, common pool resources and irrigation institutions in developing countries.; To explain this puzzle, I hypothesize that, first, irrigation performance is linked to inherent incentive problems faced by public agencies. Second, these incentive problems can be aggravated by the incentives embedded in foreign aid particularly by the moral hazard problem. Third, I argue that performance is also a function of the incentives faced by farmers as shaped by their physical, social and institutional context.; I examine the hypothesis on bureaucratic and foreign aid incentives using panel data describing the performance of the irrigation agency. To test my hypotheses about farmer's incentives, I examined a cross section data on 2,056 irrigation associations. I examined archives, conducted field work from 2003-2005 and employed key informant interviews, focus group discussions, photo-documentation, participant-observation and focused on conceptual and measurement reliability issues.; My findings confirm my hypotheses. I find that irrigation performance in the Philippines is characterized by a cycle of chronic underinvestment in maintenance, deterioration of facilities, poor water service, low productivity and poor farm incomes. Bureaucratic self interest drives the problem of underinvestment in maintenance and can be aggravated by incentives embedded in foreign aid. Underinvestment is also driven by farmer's incentives to free ride which differs between labor and monetary contribution. Finally, I find how different configurations of physical, social and institutional factors have different effects on farmer incentives.; The study has implications for 25 developing countries undertaking irrigation reforms and faced with the same issues of poor performance and incentive problems.