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VI. Conclusions

Table 8 below shows the rankings of the simulation results. The target variables appear in the table head. The policy variations are found in the rows. Full power means that the villagers are given and make use of fiscal and project power, and no power means that they do not have these powers at all, or do not make use of them. The policy end-results are ranked from 1 to 4, with 1 standing for the policy with the highest end-value and 4 for the policy with lowest end-value.

A conspicuous result is that "project empowerment" never ranks first; and, in fact, ranks last seven times. The reason is that project pressure without villagers' finance control increases LG spending either through more irregular financing, or through higher taxes, or both. Higher taxes and more irregular financing both have negative effects on villagers' development status perception and on private investment and growth.

TABLE 8: The Simulation Results of the Local Government Policy Changes


Scores: Development Status and Disposable Household Income: 1 highest, 4 lowest
Local Government Consumption: 1 largest, 4 lowest

The question, "what policy controls the size of the LG?," can best be answered with, "any policy mix with fully empowered villagers." These are ranked 6 times with 4, which means smallest LG consumption in percent of total village income. Financial empowerment is four times ranked with grade four and project empowerment two times. "No power, " produces the largest local government everywhere.

Finally the question, "Which overall policy or policy mix scores highest in terms of lowest government consumption, highest income, and highest development status?, " can be answered as follows:

  • Full Power: 6 times smallest LG, combined with 5 times highest income and, 3 times highest development status;

  • Finance Power only: 4 times smallest LG, combined with 3 times highest income and, 3 times highest development status;

  • Project Power only: 2 times smallest LG, no highest ranking in income nor development; and

  • No Power: everywhere largest government and practically everywhere lowest values in income and development status.

The simulations clearly demonstrate that policy variations matter very much "on" the local level. Are there significant differences between the Asian and European localities? From the point of view of cause and effect of the policy variations, the answer is "no;" but from the perspective of structural and process settings, "yes".

This is particularly obvious where irregular finance practices are more prevalent. The Asian localities are clearly more centralized than the European ones. Credit financing is also less restricted in the European localities. Major differences are also found in peoples' project priorities and valuation. In the Asian localities, villagers generally want more infrastructure and protective services; whereas in the European localities, villagers prefer more welfare and economic activity.

Another conspicuous difference between the European localities and the Asian localities is that in the Asian localities "Finance Power only" is ranked first nine times, whereas in the European countries this policy never occupies the first rank. The reason for this is that financially empowered villagers exert pressure to enforce accountability of the LGs, and this reduces their irregular financing practices, thereby also reducing the negative effect on private investments and growth. There is practically no irregular financing in the European localities. Fully empowered villagers create a quasi-market between government and villagers' interest groups. These cost minimizing, utility maximizing agents are beneficial for the development of a locality with a small LG.

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