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Better methods of running subsidy programs: Evidence from the Karnataka schemes of 2023

Author

Listed:
  • Jay Kulkarni

    (xKDR Forum)

  • Ajay Shah

    (xKDR Forum)

  • Susan Thomas

    (xKDR Forum)

Abstract

Governments in developing countries spend heavily on subsidies, yet much of the money never reaches households: the macro-micro gap. We measure this gap in Karnataka, India, across a natural experiment. Karnataka has been delivering conditional Direct Benefit Transfers (DBT) for about a decade now. In July 2023 the state introduced new "guarantee schemes", and directed much of its DBT allocation to a near-unconditional scheme. Because administrative records are endogenous to the state that produces them, we measure household receipts independently, from the CMIE Consumer Pyramids Household Survey. We compare robust population estimates from this survey against the state's reported expenditure on DBTs in both periods. The gap averaged about 78% over the seven pre-2023 years and fell to about 17% after the shift. The paper contributes independently measured evidence on subsidy delivery in India and a replicable method for auditing welfare programs in the presence of longitudinal data.

Suggested Citation

  • Jay Kulkarni & Ajay Shah & Susan Thomas, 2026. "Better methods of running subsidy programs: Evidence from the Karnataka schemes of 2023," Working Papers 50, xKDR.
    • Handle: RePEc:anf:wpaper:50
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    File URL: https://papers.xkdr.org/papers/2026Kulkarnietal_SubsidiesMacroMicroGap.pdf
    File Function: First version, 2026
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    More about this item

    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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