Clientelistic Politics and ProPoor Targeting: Rules versus Discretionary Budgets

• In Event: The Politics of Combatting Poverty

Abstract

Past research has shown evidence of clientelistic politics in delivery of benefits and manipulation of local government program budgets by upper level officials in the context of West Bengal, India. We examine the implications of moving to a system of formula based program budgets on pro-poor targeting. Using a household panel data for 2004- 2008, we show that targeting of anti-poverty programs within local governments (GPs) was progressive. We estimate the effect of replacing observed GP program budgets by those implied by a rule-based formula recommended by the 3rd State Finance Commission (SFC) based on GP demographic characteristics. We find that the SFC formula would have reduced pro-poor targeting of anti-poverty programs. Moreover, alternative formulae obtained by varying weights on GP characteristics used in the SFC formula improve targeting only marginally. Hence clientelism has been successful in targeting benefits to the poor, and there is little additional scope for improvements from transitioning to formula-based budgeting.

Authors

• Dilip Mookherjee

• Anusha Nath, Federal Reserve Bank of Minneapolis and University of Minnesota