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Distributional outcomes of a decentralized welfare program

  • Galasso, Emanuela
  • Ravallion, Martin

It is common for central governments, to delegate authority over the targeting of welfare programs to local community organizations - which may be better informed about who is poor, though possibly less accountable for getting the money to the local poor - while the center retains control over how much goes to each local region. The authors outline a theoretical model of the interconnected behavior of the various actors in such a setting. The model's information structure provides scope for econometric identification. Applying data for a specific program in Bangladesh, they find that overall targeting was mildly pro-poor, mostly because of successful targeting within villages. But this varied across villages. Although some village characteristics promoted better targeting, these were generally not the same characteristics that attracted resources from the center. The authors observe that the center's desire for broad geographic coverage, appears to have severely constrained the scope for pro-poor village targeting. However, poor villages tended not to be better at reaching their poor. They find some evidence that local institutions matter. The presence of cooperatives for farmers and the landless, appears to be associated with more pro-poor program targeting. The presence of recreational clubs has the opposite effect. Sometimes the benefits of decentralized social programs are captured by local elites, depending on the type of spending being decentralized. When public spending us on private (excludable) good, and there is no self-targeting mechanism to ensure that only the poor participate, there is ample scope for local mis-targeting.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2316.

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Date of creation: 30 Apr 2000
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Handle: RePEc:wbk:wbrwps:2316
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  1. Ravallion, Martin, 1984. "The social appraisal of local public spending using revealed fiscal preferences," Journal of Urban Economics, Elsevier, vol. 16(1), pages 46-64, July.
  2. Baland, J-M & Platteau, J-P, 1997. "Wealth Inequality and Efficiency in the Commons," Papers 193, Notre-Dame de la Paix, Sciences Economiques et Sociales.
  3. Ravallion, Martin, 2000. "Monitoring Targeting Performance When Decentralized Allocations to the Poor Are Unobserved," World Bank Economic Review, World Bank Group, vol. 14(2), pages 331-45, May.
  4. Eliana La Ferrara, . "Inequality and Group Participation: Theory and Evidence from Rural Tanzania," Working Papers 161, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  5. Lanjouw, Jean Olson, 1999. "Information and the operation of markets: tests based on a general equilibrium model of land leasing in India," Journal of Development Economics, Elsevier, vol. 60(2), pages 497-527, December.
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  7. Pranab Bardhan, 1996. "Decentralised Development," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 31(2), pages 139-156, July.
  8. Lanjouw, Peter & Ravallion, Martin, 1998. "Benefit incidence and the timing of program capture," Policy Research Working Paper Series 1956, The World Bank.
  9. Plotnick, Robert D, 1986. "An Interest Group Model of Direct Income Redistribution," The Review of Economics and Statistics, MIT Press, vol. 68(4), pages 594-602, November.
  10. Smith, Richard J & Blundell, Richard W, 1986. "An Exogeneity Test for a Simultaneous Equation Tobit Model with an Application to Labor Supply," Econometrica, Econometric Society, vol. 54(3), pages 679-85, May.
  11. Wolfson, Michael C, 1994. "When Inequalities Diverge," American Economic Review, American Economic Association, vol. 84(2), pages 353-58, May.
  12. Behrman, Jere R. & King, Elizabeth M., 2001. "Household schooling behaviors and decentralization," Economics of Education Review, Elsevier, vol. 20(4), pages 321-341, August.
  13. Alderman, H., 1998. "Social Assistance in Albania. Decentralization and Targeted Transfers," Papers 134, World Bank - Living Standards Measurement.
  14. Dayton-Johnson, Jeff, 2000. "Determinants of collective action on the local commons: a model with evidence from Mexico," Journal of Development Economics, Elsevier, vol. 62(1), pages 181-208, June.
  15. Dilip Mookherjee & Pranab K. Bardhan, 2000. "Capture and Governance at Local and National Levels," American Economic Review, American Economic Association, vol. 90(2), pages 135-139, May.
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