In 1994, Bolivia enacted a Law of Popular Participation (LPP) that began a massive decentralization program, consisting of the devolution of political, administrative and fiscal powers. These new powers were given to the country's recently created 314 municipalities. The majority of these were rural indigenous communities which believed this decentralization process was a way to converge, both economically and socially, towards the urban elite. Human development, measured by the Human Development Index (HDI), varied considerably across municipalities at the time the LPP was enacted, with the centralized departmental capitals having significantly higher levels of human development compared to smaller rural communities.; This paper examines the fiscal aspects of the Bolivian decentralization process and their impact on human development. Specifically, I examine whether fiscal decentralization increased human development in Bolivian municipalities, and if so, what aspects of the program contributed most to the improvement. Additionally, this paper evaluates the degree of variation in human development with respect to rural and indigenous municipalities compared to non-rural and non-indigenous municipalities. (Abstract shortened by UMI.)
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