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Does Elite Capture Matter? Local Elites and Targeted Welfare Programs in Indonesia

Author

Listed:
  • Alatas, Vivi

    (World Bank)

  • Banerjee, Abhijit

    (MIT)

  • Hanna, Rema

    (Harvard University)

  • Olken, Benjamin A.

    (MIT)

  • Purnamasari, Ririn

    (World Bank)

  • Wai-Poi, Matthew

    (World Bank)

Abstract
This paper investigates the impact of elite capture on the allocation of targeted government welfare programs in Indonesia, using both a high-stakes field experiment that varied the extent of elite influence and non-experimental data on a variety of existing government transfer programs. Conditional on their consumption level, there is little evidence that village elites and their relatives are more likely to receive aid programs than non-elites. Looking more closely, however, we find that this overall result masks a difference between different types of elites: those holding formal leadership positions are more likely to receive benefits, while informal leaders are actually less likely to. We show that capture by formal elites occurs during the distribution of benefits under the programs, and not during the processes when the beneficiary lists are determined by the central government. However, while elite capture exists, the welfare losses it creates appear quite small: since formal elites and their relatives are only 9 percent richer than non-elites, are at most about 8 percentage points more likely to receive benefits than non-elites, and represent at most 15 percent of the population, eliminating elite capture entirely would improve the welfare gains from these programs by less than one percent.

Suggested Citation

  • Alatas, Vivi & Banerjee, Abhijit & Hanna, Rema & Olken, Benjamin A. & Purnamasari, Ririn & Wai-Poi, Matthew, 2013. "Does Elite Capture Matter? Local Elites and Targeted Welfare Programs in Indonesia," Working Paper Series rwp13-008, Harvard University, John F. Kennedy School of Government.
    • Handle: RePEc:ecl:harjfk:rwp13-008
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    File URL: https://research.hks.harvard.edu/publications/workingpapers/citation.aspx?PubId=8968&type=WPN
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    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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