Does Elite Capture Matter? Local Elites and Targeted Welfare Programs in Indonesia

64 Pages Posted: 16 Sep 2013 Last revised: 17 Sep 2013

See all articles by Vivi Alatas

Vivi Alatas

World Bank - Jakarta

Abhijit V. Banerjee

Massachusetts Institute of Technology (MIT) - Department of Economics

Rema Hanna

Harvard University - Harvard Kennedy School (HKS)

Benjamin A. Olken

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER); Harvard University - Society of Fellows

Ririn Purnamasari

World Bank

Matthew Wai-Poi

World Bank

Multiple version iconThere are 2 versions of this paper

Date Written: January 1, 2013

Abstract

This paper investigates the impact of elite capture on the allocation of targeted government welfare programs in Indonesia, using both a high-stakes field experiment that varied the extent of elite influence and non-experimental data on a variety of existing government transfer programs. Conditional on their consumption level, there is little evidence that village elites and their relatives are more likely to receive aid programs than non-elites. Looking more closely, however, we find that this overall result masks a difference between different types of elites: those holding formal leadership positions are more likely to receive benefits, while informal leaders are actually less likely to. We show that capture by formal elites occurs during the distribution of benefits under the programs, and not during the processes when the beneficiary lists are determined by the central government. However, while elite capture exists, the welfare losses it creates appear quite small: since formal elites and their relatives are only 9 percent richer than non-elites, are at most about 8 percentage points more likely to receive benefits than non-elites, and represent at most 15 percent of the population, eliminating elite capture entirely would improve the welfare gains from these programs by less than one percent.

Suggested Citation

Alatas, Vivi and Banerjee, Abhijit V. and Hanna, Rema and Olken, Benjamin A. and Purnamasari, Ririn and Wai-Poi, Matthew, Does Elite Capture Matter? Local Elites and Targeted Welfare Programs in Indonesia (January 1, 2013). HKS Working Paper No. RWP13-008. Available at SSRN: https://ssrn.com/abstract=2326703 or http://dx.doi.org/10.2139/ssrn.2326703

Vivi Alatas (Contact Author)

World Bank - Jakarta ( email )

Jakarta Stock Exchange Bldg. Tower 2, 12th Floor
Jl. Jend. Sudirman Kav. 52-53
Jakarta, 12190
Indonesia

Abhijit V. Banerjee

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
Room E52-252D
Cambridge, MA 02142
United States
617-253-8855 (Phone)
617-253-6915 (Fax)

Rema Hanna

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

Benjamin A. Olken

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
E52-391
Cambridge, MA 02142
United States
617-253-6833 (Phone)
617-253-1330 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-588-1407 (Phone)

Harvard University - Society of Fellows

Cambridge, MA 02138
United States

Ririn Purnamasari

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Matthew Wai-Poi

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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