When Decentralization Meets Weak Parties: Local State Capacity and Infrastructure Delivery

How do multilevel governance arrangements shape state capacity and policy performance in contexts marked by territorial inequality and persistent political and policy struggles? This paper examines the political foundations of local bureaucratic capacity in decentralized systems where subnational governments are tasked with delivering complex infrastructure under conditions of fiscal scarcity, institutional fragmentation, and weak political intermediation, which are features increasingly common across Latin America and other emerging economies facing “poly-crisis” governance environments. I develop a two-step theory linking territorial governance structures, bureaucratic capacity, and local political incentives. First, I argue that in decentralized systems characterized by unfunded mandates and unequal territorial development, local governments can deliver infrastructure only if they assemble short-term bureaucratic capacity, such as temporary technical teams, project-specific expertise, and procedural compliance, all of them required to access discretionary investment transfers administered by central governments. These transfers are formally intended to enhance investment quality and efficiency, yet in practice they condition access on technical and administrative capacity, thereby amplifying existing disparities between well-resourced and peripheral municipalities. In such settings, variation in policy outputs reflects not only fiscal resources but also the ability of local governments to navigate multilayered administrative and procedural demands. Second, I argue that whether this capacity is built depends critically on local political incentives. In multilevel systems with weakly institutionalized party organizations, marked by limited intergovernmental coordination, ephemeral political organizations, and short political horizons, politicians face distorted incentives that undermine investments in collective capacity. Even when local executives possess the experience and knowledge needed to strengthen bureaucratic capacity, they may instead deploy these advantages toward short-term, personalistic, or extractive strategies that yield immediate political or private returns but do not improve policy performance over time. Empirically, the paper draws on fieldwork interviews with local politicians and bureaucrats about infrastructure investments, and a novel dataset that tracks all the projects initiated by municipal governments across the full project cycle (pre-investment, investment, execution, and completion) merged with electoral, fiscal, administrative, and socioeconomic records spanning multiple local administrations. This project-level approach allows for a detailed assessment of policy outputs and implementation performance, moving beyond expenditure-based measures common in the literature. I first estimate municipality fixed-effects models to examine how within-municipality changes in bureaucratic and fiscal resources shape infrastructure delivery. I then exploit close local executive elections in a regression discontinuity design to estimate the local causal effect of electing an experienced mayor on capacity building. The findings show that access to discretionary investment funding as an indicator of short-term bureaucratic capacity is strongly associated with more timely, larger-scale, and more complete infrastructure delivery. Yet electing experienced local executives does not systematically lead to capacity expansion. Together, these results suggest that under weak party systems, multilevel governance can entrench short-termism and adverse selection at the local level, limiting the capacity of decentralized systems to respond effectively to persistent crises and territorial inequality. The paper contributes to comparative research on how territorial governance structures shape policy outputs and state capacity in contexts of enduring political and policy struggles.