Local Inequality and Project Choice: Theory and Evidence from Ecuador

44 Pages Posted: 20 Apr 2016

See all articles by M. Caridad Araujo

M. Caridad Araujo

World Bank

Francisco H. G. Ferreira

World Bank - Development Research Group (DECRG)

Peter F. Lanjouw

World Bank - Development Research Group (DECRG)

Berk Ozler

World Bank - Development Economics Research Group (DECRG)

Date Written: August 1, 2006

Abstract

This paper provides evidence consistent with elite capture of Social Fund investment projects in Ecuador. Exploiting a unique combination of data-sets on village-level income distributions, Social Fund project administration, and province level electoral results, the authors test a simple model of project choice when local political power is unequally distributed. In accordance with the predictions of the model, poorer villages are more likely to receive projects that provide excludable (private) goods to the poor, such as latrines. Controlling for poverty, more unequal communities are less likely to receive such projects. Consistent with the hypothesis of elite capture, these results are sensitive to the specific measure of inequality used in the empirical analysis, and are strongest for expenditure shares at the top of the distribution.

Keywords: elite capture, social funds, inequality, poverty

JEL Classification: D72, H42, O15

Suggested Citation

Araujo, M. Caridad and Ferreira, Francisco H. G. and Lanjouw, Peter F. and Ozler, Berk, Local Inequality and Project Choice: Theory and Evidence from Ecuador (August 1, 2006). World Bank Policy Research Working Paper No. 3997. Available at SSRN: https://ssrn.com/abstract=927140

M. Caridad Araujo (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Francisco H. G. Ferreira

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
202-473-4382 (Phone)

Peter F. Lanjouw

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
202-473-4529 (Phone)
202-522-1153 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/planjouw

Berk Ozler

World Bank - Development Economics Research Group (DECRG) ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

HOME PAGE: http://econ.worldbank.org/staff/bozler

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