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Local inequality and project choice : theory and evidence from Ecuador

Author:	Araujo, M. Caridad; Ferreira, Francisco H.G.; Lanjouw, Peter; Ozler, Berk;	Collection Title:	Policy, Research working paper ; no. WPS 3997
Country:	Ecuador;	Date Stored:	2006/08/25
Document Date:	2006/08/01	Document Type:	Policy Research Working Paper
Language:	English	Region:	Latin America & Caribbean
Report Number:	WPS3997	SubTopics:	Poverty Monitoring & Analysis; Rural Poverty Reduction; Economic Theory & Research; Population Policies; Services & Transfers to Poor
Volume No:	1 of 1

Summary: This paper provides evidence consistent with elite capture of Social Fund investment projects in Ecuador. Exploiting a unique combination of data-sets on village-level income distributions, Social Fund project administration, and province level electoral results, the authors test a simple model of project choice when local political power is unequally distributed. In accordance with the predictions of the model, poorer villages are more likely to receive projects that provide excludable (private) goods to the poor, such as latrines. Controlling for poverty, more unequal communities are less likely to receive such projects. Consistent with the hypothesis of elite capture, these results are sensitive to the specific measure of inequality used in the empirical analysis, and are strongest for expenditure shares at the top of the distribution.


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