Pro-poor or Political Targeting: an Analysis of Social Assistance in Developing Countries

Abstract: Politicians may use social policy and pro-poor spending for self-interest and strategic manipulation. In this paper, we focus on the politics of the design of social assistance programs in developing countries. In particular, we explore how rent seeking may affect the choice of targeting mechanisms used to determine the beneficiary base of transfers in different political regimes. Using the new NSTP dataset (2016) we are able to contrast more than 180 programs with categorical, community-based, means-tested, proxy means-tested and other types of targeting. The key attribute is whether an intermediary or any third part is involved in the process of transfer eligibility. We argue that in view of subjectivity of decisions and more chances for manipulation such targeting schemes are more often adopted in societies with higher rent seeking. Applying an IV approach based on the neighbours’ average rent seeking levels we find that indeed community-based and means-tested programs that involve the assessment of beneficiaries’ eligibility by an intermediary such as a social worker or community chief are more chosen in regimes with higher political corruption or non-democracies with lower checks and balances. On the contrary, proxy means-tested programs that are based on ex ante evaluation of the poverty level and objective information on potential beneficiaries are significantly less prevalent in high corruptible environments and in non-democracies with low checks and balances. This might be explained as they are less prone to be used for strategic manipulation. Our findings contribute to a better understanding of pro-poor versus political targeting across regime types.