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Clientelistic Politics and Pro-Poor Targeting: Rules versus Discretionary Budgets

Staff Report 624 | Published May 4, 2021

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Authors

Dilip Mookherjee Boston University
Anusha Nath Research Economist
Clientelistic Politics and Pro-Poor Targeting: Rules versus Discretionary Budgets

Abstract

Past research has provided evidence of clientelistic politics in delivery of program benefits by local governments (_gram panchayats (GPs)_), and manipulation of GP program budgets by legislators and elected officials at upper tiers in West Bengal, India. Using household panel survey data spanning 1998-2008, we examine the consequences of clientelism for distributive equity. We find that targeting of anti-poverty programs was progressive both within and across GPs, and is explained by greater 'vote responsiveness' of poor households to receipt of welfare benefits. Across-GP allocations were more progressive than a rule-based formula recommended by the 3rd State Finance Commission (SFC) based on GP demographic characteristics. Moreover, alternative formulae for across-GP budgets obtained by varying weights on GP characteristics used in the SFC formula would have improved pro-poor targeting only marginally. Hence, there is not much scope for improving pro-poor targeting of private benefits by transitioning to formula-based budgeting.