Reducing horizontal neglect in local government: The role of informal institutions

Abstract The problem of “horizontal neglect” is fundamental to decentralization. However, while individual local authorities may lack incentives to consider the benefits and costs that their actions have on others, they are not always indifferent to these spillover effects. The study focuses on a clear case of horizontal neglect, namely the tendency of local authorities to overspend prior to merging. By employing a survey experiment involving Norwegian local elected officials, the article demonstrates that horizontal neglect can be alleviated through informal institutions, specifically through prosocial norms and the framing of decisions in a way that encourages officials to consider the impact on other jurisdictions. Priming local politicians with reminders of their broader responsibilities reduces both horizontal neglect and the overspending effect of social norms that stem from local politicians’ opposition to the merger of their own municipality.