Abstract
I provide a critical overview of the literature on political decentralization. After reviewing first- and second-generation theories of federalism, I describe recent empirical studies focusing mainly on determinants of capture and local government accountability emphasized by second-generation theories. The article concludes by describing emerging new issues that deserve more attention in future research: a wider range of political distortions beyond capture and corruption; effects of decentralization on intercommunity allocations, learning, and experimentation, and on democracy itself; a comparison of decentralization with other organizational alternatives; and issues pertaining to design and implementation raised by first-generation federalism theories, such as interjurisdictional spillovers, vertical fiscal relations, the range of devolution, and the political economy of implementation.