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The Political Economy of Attracting Public Funds: The Case of Lebanon


  • Nisreen Salti

    () (Department of Economics, American University of Beirut)

  • Jad Chaaban


Using a new exceptional dataset on 80 poverty pockets in Lebanon in 2004, we propose to test the confessional and political channels of influence through which these pockets are potentially able to attract development assistance. Lebanon constitutes a perfect case study for the interaction of identity-based polarization and fractionalization (based on confession) and poverty in the context of a developing country. We investigate the effect on the level of development assistance funds transferred to municipal governments of polarization, fractionalization and sectarian distance at the level of the poverty pockets and find robust results indicating that polarization and fractionalization are significant determinants of a pocket’s ability to attract funding. We also find that one of our measures of sectarian distance, the share in the larger district of a poverty pocket’s largest sect, also generates more revenue for the pocket. Pockets with a mix of sects have greater ease in attracting funds, which is consistent with the prerogative of confessional balance in government policy dictated by the power-sharing game in the post-war era. The results are robust to the inclusion of a wide variety of controls. They put into question the design of effective channels to allocate development funds in polarized societies.

Suggested Citation

  • Nisreen Salti & Jad Chaaban, 2010. "The Political Economy of Attracting Public Funds: The Case of Lebanon," Working Papers 550, Economic Research Forum, revised 09 Jan 2010.
  • Handle: RePEc:erg:wpaper:550

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    References listed on IDEAS

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    7. Alberto Alesina & Reza Baqir & William Easterly, 1999. "Public Goods and Ethnic Divisions," The Quarterly Journal of Economics, Oxford University Press, vol. 114(4), pages 1243-1284.
    8. repec:pri:rpdevs:krueger_maleckova_education_poverty_political is not listed on IDEAS
    9. Jean-Yves Duclos & Joan Esteban & Debraj Ray, 2004. "Polarization: Concepts, Measurement, Estimation," Econometrica, Econometric Society, vol. 72(6), pages 1737-1772, November.
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    11. World Bank, 2005. "Lebanon : Public Expenditure Review, Reform Priorities for Fiscal Adjustment, Growth and Poverty Alleviation," World Bank Other Operational Studies 8480, The World Bank.
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    17. Marta Reynal-Querol, 2002. "Ethnicity, Political Systems, and Civil Wars," Journal of Conflict Resolution, Peace Science Society (International), vol. 46(1), pages 29-54, February.
    18. Dibeh, Ghassan, 2005. "The Political Economy of Postwar Reconstruction in Lebanon," WIDER Working Paper Series 044, World Institute for Development Economic Research (UNU-WIDER).
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    Cited by:

    1. Rawaa Harati, 2014. "Firms Informality: A Model and Empirical Evidence for Lebanon," Working Papers 883, Economic Research Forum, revised Dec 2014.

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