Political Economy Effects of Policy Interventions

As a program scales up to reach more beneficiaries, it may change the behaviors of politicians and policymakers in response to the program. These political economy responses are unlikely to materialize from pilot programs that touch a few households or businesses, but successfully scaling a program requires understanding how the program interacts with the political landscape — especially if governments become key implementation partners in the scale-up process.

Scaling a program can affect political behavior in a number of ways, with implications for the effectiveness of the program itself alongside other economic and political outcomes. First, externally funded aid programs may erode political accountability if ineffective leaders claim credit for successful programs (Deaton, 2013). Second, large-scale programs may induce governments to reallocate effort or financial resources, potentially enhancing the effects of a program or undermining its goals. For example, Guiteras and Mobarak (2016) find that local leaders exert more effort in communities receiving a sanitation program, generating benefits even for community members who were not directly touched by the program. Externally funded programs may also affect the spending decisions of governments, encouraging complementary investments or moving funds to other domains. Finally, as programs scale, they become more visible. Among constituents, this visibility can provoke public backlash, or even shift political support from one party to another, while bureaucrats and leaders may see opportunities for corruption (Banerjee et al, 2017; Manacorda, Miguel, and Vigorio, 2009).

Y-RISE supports research on these topics under the direction of conveners Frederico Finan and Gerard Padró i Miquel. Y-RISE convener Frederico Finan, and co-authors, have provided compelling evidence that the effectiveness of of a program can depend on whether the implementers face electoral incentives. In Brazil, they find that a large-scale conditional cash transfer program was significantly more effective in reducing school drop-out rates when local mayors faced reelection (de Janvry, Finan, and Sadoulet, 2012). In the absence of this accountability, mayors have the incentive to appropriate funds at the expense of lower welfare ( Finan, Mazzocco, 2017 ).