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

Listed author(s):
  • Pia M. Basurto
  • Pascaline Dupas
  • Jonathan Robinson

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 or accountability 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 for 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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 23383.

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Date of creation: May 2017
Handle: RePEc:nbr:nberwo:23383
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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. Angus Deaton & Salman Zaidi, 2002. "Guidelines for Constructing Consumption Aggregates for Welfare Analysis," World Bank Publications, The World Bank, number 14101, December.
  3. 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.
  4. Besley, Timothy, 1990. "Means Testing versus Universal Provision in Poverty Alleviation Programmes," Economica, London School of Economics and Political Science, vol. 57(225), pages 119-129, February.
  5. Chirwa, Ephraim & Dorward, Andrew, 2013. "Agricultural Input Subsidies: The Recent Malawi Experience," OUP Catalogue, Oxford University Press, number 9780199683529.
  6. 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.
  7. 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.
  8. Bruce D. Meyer & James X. Sullivan, 2012. "Identifying the Disadvantaged: Official Poverty, Consumption Poverty, and the New Supplemental Poverty Measure," Journal of Economic Perspectives, American Economic Association, vol. 26(3), pages 111-136, Summer.
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