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

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  • Vivi Alatas
  • Abhijit Banerjee
  • Rema Hanna
  • Benjamin A. Olken
  • Ririn Purnamasari
  • Matthew Wai-Poi

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. However, this overall result masks stark differences between different types of elites: those holding formal leadership positions are more likely to receive benefits, while informal leaders are less likely to receive them. We show that capture by formal elites occurs when program benefits are actually distributed to households, and not during the processes of determining who should be on the beneficiary lists. However, while elite capture exists, the welfare losses it creates appear 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.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18798.

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Date of creation: Feb 2013
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Handle: RePEc:nbr:nberwo:18798

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Cited by:
  1. Desai, Raj M. & Joshi, Shareen, 2013. "Collective action and community development : evidence from self-help groups in rural India," Policy Research Working Paper Series 6547, The World Bank.

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