Using data from a field experiment in 500 villages, this paper studies how local institutions affect the quality of governance, as measured by aid distribution outcomes. It finds that in villages where elected councils exist and manage distributions, aid targeting improves. However, if the distribution is not clearly assigned to either the council or customary leaders, the creation of elected councils increases embezzlement and makes decision-making less inclusive. Requiring that women manage the distribution jointly with customary leaders also increases embezzlement. Thus, while elected councils can improve governance, overlapping mandates between new and existing institutions may result in increased rent-seeking.
This study focuses on an instance of exogenous change in local institutions whereby the creation of elected councils was randomized across 500 villages in Afghanistan, with control villages retaining customary governance structures. To identify the effects of this variation on the quality of local governance, village-level food aid distributions were organised approximately four years after the creation of the councils. The outcomes of food aid distributions provided a measure of local governance quality: such distributions are a standard public service commonly performed by village leaders in rural Afghanistan and have important economic consequences for villagers. In particular, the study examined the effects of the institutional variation on aid targeting (i.e. whether the food aid reached the neediest households), the incidence of embezzlement and nepotism, and the inclusiveness of the process by which it was decided which households received food aid.
To explore the mechanisms by which council creation affects local governance, the study introduced randomised variation in how the distribution was managed. In villages with elected councils, sometimes the council was mandated to manage the distribution, as opposed to the distribution being overseen by the de facto village leadership (the people identified as leaders by villagers). In villages without elected councils, sometimes women were requested to participate in addition to the de facto village leadership. By comparing outcomes in these four groups of villages, the study isolated the effects of: (i) the management of the distribution by the elected council; (ii) the existence of elected councils per se (without an explicit requirement on who manages the distribution); and (iii) mandating female participation in the distribution.
Overall, the results suggest that democratic councils improve the quality of governance, but only if there is no ambiguity over the division of responsibility among the various governance bodies. Alternately, the creation of parallel institutions without a clear division of responsibilities can lead to an increase in rent-seeking by local leaders. Findings include the following:
- The management of the distribution by elected councils improves the targeting of food aid, but does not affect levels of embezzlement or the inclusiveness of decision-making.
- The existence of a democratic council per se (without a clear mandate on who assumes responsibility for the distribution) increases embezzlement, renders decision-making less inclusive, and does not change targeting
- Mandating female involvement has a similar effect, with increases in embezzlement and no change in targeting or participation.
- Reports by enumerators confirmed the statistical result that embezzlement increased when both the elected council and customary leaders were involved in the distribution, as both sets of leaders believed they were entitled to a portion of the food aid as a fee for the service of managing the distribution. While villagers privately opposed this on account of the fact that it deprived poor households of what was due to them, the power of local elites discouraged villagers from opposing the practice in public.
