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

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  • Basurto, Pia
  • Dupas, Pascaline
  • Robinson, Jonathan

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.

Suggested Citation

  • Basurto, Pia & Dupas, Pascaline & Robinson, Jonathan, 2017. "Decentralization and Efficiency of Subsidy Targeting: Evidence from Chiefs in Rural Malawi," CEPR Discussion Papers 12012, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12012
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    References listed on IDEAS

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    1. Jessica Cohen & Pascaline Dupas, 2008. "Free Distribution or Cost-Sharing? Evidence from a Malaria Prevention Experiment," NBER Working Papers 14406, National Bureau of Economic Research, Inc.
    2. Deaton, A. & Zaidi, S., 1999. "Guidelines for Constructing Consumption Aggregates for Welfare Analysis," Papers 192, Princeton, Woodrow Wilson School - Development Studies.
    3. Beegle, Kathleen & Galasso, Emanuela & Goldberg, Jessica, 2017. "Direct and indirect effects of Malawi's public works program on food security," Journal of Development Economics, Elsevier, vol. 128(C), pages 1-23.
    4. Stoeffler, Quentin & Mills, Bradford & del Ninno, Carlo, 2016. "Reaching the Poor: Cash Transfer Program Targeting in Cameroon," World Development, Elsevier, vol. 83(C), pages 244-263.
    5. Angus Deaton & Salman Zaidi, 2002. "Guidelines for Constructing Consumption Aggregates for Welfare Analysis," World Bank Publications, The World Bank, number 14101, April.
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    8. Chirwa, Ephraim & Dorward, Andrew, 2013. "Agricultural Input Subsidies: The Recent Malawi Experience," OUP Catalogue, Oxford University Press, number 9780199683529.
    9. Jessica Cohen & Pascaline Dupas, 2010. "Free Distribution or Cost-Sharing? Evidence from a Randomized Malaria Prevention Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 125(1), pages 1-45.
    10. Daron Acemoglu & Tristan Reed & James A. Robinson, 2014. "Chiefs: Economic Development and Elite Control of Civil Society in Sierra Leone," Journal of Political Economy, University of Chicago Press, vol. 122(2), pages 319-368.
    11. Dorward, Andrew & Chirwa, Ephraim & Kelly, Valerie A. & Jayne, Thomas S. & Slater, Rachel & Boughton, Duncan, 2008. "Evaluation Of The 2006/7 Agricultural Input Subsidy Programme, Malawi. Final Report," Food Security Collaborative Working Papers 97143, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    12. Kilic,Talip & Whitney,Edward Matthew & Winters,Paul Conal & Kilic,Talip & Whitney,Edward Matthew & Winters,Paul Conal, 2013. "Decentralized beneficiary targeting in large-scale development programs : insights from the Malawi farm input subsidy program," Policy Research Working Paper Series 6713, The World Bank.
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    Cited by:

    1. Silvia Marchesi & Tania Masi, 2019. "Allocation of Implementing Power: Evidence from World Bank Projects," Development Working Papers 447, Centro Studi Luca d'Agliano, University of Milano.

    More about this item

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • 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
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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