Better methods of running subsidy programs: Evidence from the Karnataka schemes of 2023

Jay Kulkarni, Ajay Shah () and Susan Thomas ()
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Ajay Shah: xKDR Forum
Susan Thomas: xKDR Forum

No 50, Working Papers from xKDR

Abstract: Governments in developing countries spend heavily on subsidies, yet much of the money never reaches households: the macro-micro gap. We measure this gap in Karnataka, India, across a natural experiment. Karnataka has been delivering conditional Direct Benefit Transfers (DBT) for about a decade now. In July 2023 the state introduced new "guarantee schemes", and directed much of its DBT allocation to a near-unconditional scheme. Because administrative records are endogenous to the state that produces them, we measure household receipts independently, from the CMIE Consumer Pyramids Household Survey. We compare robust population estimates from this survey against the state's reported expenditure on DBTs in both periods. The gap averaged about 78% over the seven pre-2023 years and fell to about 17% after the shift. The paper contributes independently measured evidence on subsidy delivery in India and a replicable method for auditing welfare programs in the presence of longitudinal data.

JEL-codes: D73 H53 I38 O12 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2026-08
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https://papers.xkdr.org/papers/2026Kulkarnietal_SubsidiesMacroMicroGap.pdf First version, 2026 (application/pdf)

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