Jeffrey Cheah Professor of South-East Asia Studies
Does Elite Capture Matter? Local Elites and Targeted Welfare Programs in Indonesia
Alatas, Vivi, Abhijit Banerjee, Rema Hanna, Benjamin A. Olken, Ririn Purnamasari, and Matthew Wai-Poi. "Does Elite Capture Matter? Local Elites and Targeted Welfare Programs in Indonesia." HKS Faculty Research Working Paper Series RWP13-008, April 2013.
This paper investigates the impact of elite capture on the allocation of targeted government
welfare programs in Indonesia, using both a high-stakes field experiment that varied the extent of
elite influence and non-experimental data on a variety of existing government transfer programs.
Conditional on their consumption level, there is little evidence that village elites and their relatives
are more likely to receive aid programs than non-elites. Looking more closely, however, we find
that this overall result masks a difference between different types of elites: those holding formal
leadership positions are more likely to receive benefits, while informal leaders are actually less
likely to. We show that capture by formal elites occurs during the distribution of benefits under the
programs, and not during the processes when the beneficiary lists are determined by the central
government. However, while elite capture exists, the welfare losses it creates appear quite small:
since formal elites and their relatives are only 9 percent richer than non-elites, are at most about 8
percentage points more likely to receive benefits than non-elites, and represent at most 15 percent
of the population, eliminating elite capture entirely would improve the welfare gains from these
programs by less than one percent.