Decentralization and Efficiency of Subsidy Targeting: Evidence from Chiefs in Rural Malawi

53 Pages Posted: 2 May 2017

See all articles by Pia Basurto

Pia Basurto

University of California, Santa Cruz

Pascaline Dupas

Stanford University

Jonathan Robinson

University of California, Santa Cruz

Multiple version iconThere are 2 versions of this paper

Date Written: April 2017

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 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 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.

JEL Classification: D73, I38, O12, Q12

Suggested Citation

Basurto, Pia and Dupas, Pascaline and Robinson, Jonathan, Decentralization and Efficiency of Subsidy Targeting: Evidence from Chiefs in Rural Malawi (April 2017). CEPR Discussion Paper No. DP12012. Available at SSRN: https://ssrn.com/abstract=2961775

Pia Basurto (Contact Author)

University of California, Santa Cruz ( email )

1156 High St
Santa Cruz, CA 95064
United States

Pascaline Dupas

Stanford University ( email )

Stanford, CA 94305
United States

Jonathan Robinson

University of California, Santa Cruz ( email )

1156 High St
Santa Cruz, CA 95064
United States

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