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Decentralization and efficiency of subsidy targeting: Evidence from chiefs in rural Malawi.

Authors
  • Basurto, Maria Pia1
  • Dupas, Pascaline2, 3
  • Robinson, Jonathan3, 4
  • 1 Universidad del Pacífico, Lima, Perú.
  • 2 Stanford University, United States of America. , (United States)
  • 3 NBER, United States of America. , (United States)
  • 4 University of California, Santa Cruz, United States of America. , (United States)
Type
Published Article
Journal
Journal of Public Economics
Publisher
Elsevier BV
Publication Date
May 01, 2020
Volume
185
Pages
104047–104047
Identifiers
DOI: 10.1016/j.jpubeco.2019.07.006
PMID: 32435073
Source
Medline
Keywords
Language
English
License
Unknown

Abstract

Lower-income 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 trade-off 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 household panel data, 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 strict poverty-targeting. This could be welfare improving, since within-village redistribution is common. Productive efficiency targeting is concentrated in villages with above-median levels of redistribution. © 2019 The Authors.

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