Skip to content Skip to navigation

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

Jul 2017
Working Paper
Maria Pia Basurto Preciado, Pascaline Dupas, Jonathan Robinson

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 ad- vantages, 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) de- centralized 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.

Publication Keywords: 
Targeting
Decentralization
Political Economy
Agricultural Inputs
Chiefs
Subsidies
Geographic Regions: 
Africa