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.