Decentralization and efficiency of subsidy targeting: Evidence from chiefs in rural Malawi

Maria Basurto Preciado, Pascaline Dupas and Jonathan Robinson

Journal of Public Economics, 2020, vol. 185, issue C

Abstract: Lower-income 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 trade-off 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 household panel data, 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 strict poverty-targeting. This could be welfare improving, since within-village redistribution is common. Productive efficiency targeting is concentrated in villages with above-median levels of redistribution.

Keywords: Nepotism; Productive efficiency; Political economy; Agricultural inputs; Chiefs; Subsidies (search for similar items in EconPapers)
JEL-codes: D73 I38 O12 Q12 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (46)

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Related works:
Working Paper: Decentralization and Efficiency of Subsidy Targeting: Evidence from Chiefs in Rural Malawi (2017)
Working Paper: Decentralization and Efficiency of Subsidy Targeting: Evidence from Chiefs in Rural Malawi (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:185:y:2020:i:c:s0047272719300994

DOI: 10.1016/j.jpubeco.2019.07.006

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