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

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 pover

SUBMITTER: Basurto MP 

PROVIDER: S-EPMC7224518 | biostudies-literature | 2020 May

REPOSITORIES: biostudies-literature