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Public Good Provision in Indian Rural Areas: the Returns to Collective Action by Microfinance Groups

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  • Paolo Casini
  • Lore Vandewalle

    ()

  • Zaki Wahhaj

    ()

Abstract

Self-help groups (SHGs) are the most common form of microfinance in India. We provide evidence that SHGs, composed of women only, undertake collective actions for the provision of public goods. Using a theoretical model, we show that an elected official, whose aim is to maximise re-election chances, would exert higher effort in providing public goods when private citizens undertake collective action and coordinate their voluntary contributions towards the same goods. This effect occurs although government and private contributions are assumed to be perfect substitutes. Using first-hand data on SHGs in India, we test the predictions of the model and show that, in response to collective action by SHGs, local authorities tackle a larger variety of public issues, and are more likely to tackle issues of interest to SHGs.

Suggested Citation

  • Paolo Casini & Lore Vandewalle & Zaki Wahhaj, 2015. "Public Good Provision in Indian Rural Areas: the Returns to Collective Action by Microfinance Groups," Studies in Economics 1503, School of Economics, University of Kent.
  • Handle: RePEc:ukc:ukcedp:1503
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    Cited by:

    1. Ban,Radu & Gilligan,Michael J. & Rieger,Matthias, 2015. "Self-help groups, savings and social capital : evidence from a field experiment in Cambodia," Policy Research Working Paper Series 7382, The World Bank.
    2. Jean-Marie Baland & Rohini Somanathan & Lore Vandewalle, 2011. "Socially Disadvantaged Groups and Microfinance in India," Working Papers 1117, University of Namur, Department of Economics.
    3. Bathla, S. & Bhattacharya, P. & D'Souza, Anna, 2015. "India’s National Food Security Act 2013: Food Distribution through Revamped Public Distribution System or Food Stamps and Cash Transfers?," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 28(1).
    4. Vandewalle, Lore, 2017. "The Role of Accountants in Indian Self-Help Groups: A Trade-off between Financial and Non-Financial Benefits," World Development, Elsevier, vol. 93(C), pages 177-192.
    5. Brian P. Greaney & Joseph P. Kaboski & Eva Van Leemput, 2016. "Can Self-Help Groups Really Be "Self-Help"?," Review of Economic Studies, Oxford University Press, vol. 83(4), pages 1614-1644.
    6. Guilhem Cassan & Lore Vandewalle, 2017. "Identities and Public Policies: Unintended Effects of Political Reservations for Women in India," IHEID Working Papers 18-2017, Economics Section, The Graduate Institute of International Studies.
    7. Raj M. Desai & Shareen Joshi, 2014. "Collective Action and Community Development: Evidence from Self-Help Groups in Rural India," World Bank Economic Review, World Bank Group, vol. 28(3), pages 492-524.

    More about this item

    JEL classification:

    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods

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