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

Maria Pia Basurto, Pascaline Dupas, Jonathan Robinson

Research output: Contribution to journalArticlepeer-review

34 Scopus citations

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.

Original languageEnglish (US)
Article number104047
JournalJournal of Public Economics
Volume185
DOIs
StatePublished - May 2020
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Keywords

  • Agricultural inputs
  • Chiefs
  • Nepotism
  • Political economy
  • Productive efficiency
  • Subsidies

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