Pia M. Basurto
Department of Economics, UC Santa Cruz
Santa Cruz, CA 95064
NBER Working Papers and Publications
|May 2017||Decentralization and Efficiency of Subsidy Targeting: Evidence from Chiefs in Rural Malawi|
with Pascaline Dupas, Jonathan Robinson: w23383
Developing 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 or accountability advantages, but may be prone to elite capture. We study this tradeoff in the context of two large-scale subsidy programs in Malawi (for agricultural inputs and for food) decentralized to traditional leaders (“chiefs”) who are asked to target the needy. Using high-frequency household panel data on neediness and shocks, 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 ...