124 Chasing the Wind: Assessing Philippine Democracy, Second Edition These outcomes were the ones expected to be produced by Republic Act 7160 or the new Local Government Code (LGC) passed in 1991 by Congress. To empirically examine the links between the processes and outcomes expected under decentralization, Capuno (2005) provides an illustration that shows the expected connection between local governance and local development in a decentralized environment. Figure 2. Linkage between local governance and local development Social inclusion Local Governance Local Development Local Service Provision Accountability, Par cipa on, Transparency Efficiency, Equity Level of development as ini al condi on Source: Capuno (2005) In this illustration, Capuno argues that “the quality of local governance bears on the efciency and equity of local public services, and therefore on local development.” He drew the connections between the three variables from a theory of scal federalism that emphasizes efciency gains when responsibilities and resources are transferred from national to subnational/local governments. The basic belief in the theory of scal federalism is that subnational governments would be competing with one another and this competition: …provides an incentive to foster local economic prosperity rather than costly market intervention, service to interest groups, and corruption…Governments that fail to foster markets risk falling land values and the loss of capital and labor–and hence valuable tax revenue. Put another way, interjurisdictional competition provides political officials with strong scal incentives to pursue policies that provide for a healthy local economy. (Weingast 2009:280) The theory of scal federalism suggests that the decisions of local ofcials at the local government level will be guided by the need to be more competitive. The local government's competitiveness ensures that it is able to keep its constituents from moving elsewhere as the theory in itself believes that citizens in a decentralized arrangement could “vote with their feet.” However, this idealized competition and the possibility of citizens migrating to better