Decentralization and Efficiency of Subsidy Targeting: Evidence from Chiefs in Rural Malawi

Pascaline Dupas, Pia Basurto and Jonathan Robinson

No 12012, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: 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 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 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 efficient than what could be achieved through a PMT. This could be welfare improving, since within-village redistribution is common.

JEL-codes: D73 I38 O12 Q12 (search for similar items in EconPapers)
Date: 2017-04
New Economics Papers: this item is included in nep-agr and nep-dev
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Citations: View citations in EconPapers (14)

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Related works:
Journal Article: Decentralization and efficiency of subsidy targeting: Evidence from chiefs in rural Malawi (2020)
Working Paper: Decentralization and Efficiency of Subsidy Targeting: Evidence from Chiefs in Rural Malawi (2017)
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