Assessing Heterogeneity in Governance Outcome: Evidence from Local Government Institutional Capacity Self-Assessment (LISA) in Nepal

Abstract

Local Government Institutional Capacity Self-Assessment (LISA) is a tool for local governments to evaluate their own performance in Nepal. A key strength of LISA is its self-evaluation approach, which assesses local government workflows and achievements to identify the strengths and weaknesses for improving governance and development delivery. It facilitates the critical analysis of periodic plans, financial management, and governance delivery while promoting the development of quantifiable indicators and enhancing local government capacity on a larger scale. It covers ten dimensions for the evaluation such as Governance Approach, Organization and Administration, Annual Budgeting and Planning Management, Financial Management, Public Service Delivery, Judicial Proceedings, Physical Infrastructure, Social Inclusion, Environment Protection and Disaster Management, and Collaboration and Coordination. Each dimension includes a set of major indicators and sub-indicators, with a total of 100 indicators cumulatively across all dimensions. It broadly encompasses accomplishments and evaluation methods through three distinct approaches: Totalitarian Approach, Procedural Order, and Quantitative Results. This study of evaluation approaches, multi-dimensional scope and LISA scores of 749 local governments (published by the ministry after Quality Assurance) for the Fiscal Year 2022/23 by Structural Equation Modeling (SEM) divulges the heterogeneity in local governance. The study results reveal that, through the three evaluation approaches, the ten categorized dimensions each contribute differently to governance outcomes. These variations highlight how each dimension's unique impact can influence overall performance. The direction and strength of their relationships can predict how changes in one area might impact another. The newly institutionalized governance framework, along with its assessment technique, serves as a valuable tool for promoting balanced regional development and improving local governance. By maintaining institutional bricolage, addressing the exit-voice dichotomy, and facilitating yardstick competition, this evaluation process effectively integrates diverse local needs and promotes the whole of the government. Thus, moving beyond a blanket approach, governing policies in Nepal must adopt targeted and tailored strategies that account for the diverse realities and heterogeneity in local governance outcomes.