Political alignment and (mis)allocation of public resources

Abstract

Partisan bias favoring local politicians aligned with the ruling national party can result in the misallocation of public resources; however, the distributional consequences of such bias remain unclear. We examine this question in the context of disaster recovery allocation in Nepal. Utilizing a close-election regression discontinuity design and rich administrative data from an earthquake house reconstruction program, we demonstrate that ruling-party-aligned local politicians deliver more aid to their constituents compared to those aligned with the opposition party. Ruling politicians enroll 40 percent more new beneficiaries, but this effect is concentrated in areas with greater demand for reconstruction aid: poor rural regions and locations heavily impacted by the earthquake. This redistribution is facilitated by the program’s grievance redressal system that allows local politicians to use their discretionary power to better respond to the demands of the earthquake-affected households. Consequently, the incumbent candidate and their party get rewarded with a higher vote share in the next election, but not sufficiently to affect the likelihood of winning re-election.