Democracy, Public Expenditures, and the Poor: Understanding Political Incentives for Providing Public Services – Keefer and Khemani (2005)

The incentives for politicians and leaders to provide a good level of service delivery to citizens and to reduce poverty varies substantially across countries. In many contexts, politicians and leaders will often be driven to divert public resources to political rents, which harms the majority of individuals whilst benefitting a few elites. This can remain true even in democracies. These distortions can be traced to imperfections in political markets that are greater in some countries than in others. This article focuses on three political market imperfections that help to understand the incentives governments have for providing services to less fortunate citizens: (1) lack of information among voters about the performance of politicians, (2) social fragmentation among voters manifested as identity-based voting, and (3) lack of credibility of political promises to citizens. By analysing these three political market imperfections, Keefer and Khemani argue that if these imperfections are not adequately addressed, attempts to improve service delivery to poorer citizens will be met with a number of challenges. The authors claim that this analysis has implications for policy and for reforms to improve public goods provision and reduce poverty.