Working Paper: NBER ID: w23383
Authors: Pia M. Basurto; Pascaline Dupas; Jonathan Robinson
Abstract: Developing countries spend vast sums on subsidies. Beneficiaries are typically selected via either a proxy-means test (PMT) or through a decentralized identification process led by local leaders. A decentralized allocation may offer informational or accountability advantages, but may be prone to elite capture. We study this tradeoff in the context of two large-scale subsidy programs in Malawi (for agricultural inputs and for food) decentralized to traditional leaders (“chiefs”) who are asked to target the needy. Using high-frequency household panel data on neediness and shocks, we find that nepotism exists but has only limited mistargeting consequences. Importantly, we find that chiefs target households with higher returns to farm inputs, generating an allocation that is more productively efficient than what could be achieved through a PMT. This could be welfare improving, since within-village redistribution is common.
Keywords: Decentralization; Subsidy Targeting; Malawi; Chiefs; Nepotism
JEL Codes: D73; I38; O12; Q12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| nepotism (M51) | higher exclusion error rate (C52) |
| local knowledge (D83) | higher likelihood of subsidy receipt for households with negative shocks (H53) |
| local information (R53) | subsidy allocation efficiency (D61) |
| chiefs' allocation (G35) | PMT scores (C52) |