Public Good Provision in Indian Rural Areas: The Returns to Collective Action by Microfinance Groups

61 Pages Posted: 20 Apr 2016

See all articles by Paolo Casini

Paolo Casini

KU Leuven

Lore Vandewalle

Graduate Institute of International and Development Studies (IHEID) - Department of Economics; University of Oslo

Zaki Wahhaj

University of Kent - Department of Economics; University of Namur; University of Kent - School of Economics

Date Written: August 19, 2015

Abstract

Self-help groups (SHGs) are the most common form of microfinance in India. The authors provide evidence that SHGs, composed of women only, undertake collective actions for the provision of public goods within village communities. Using a theoretical model, this paper shows that an elected official, whose aim is to maximize re-election chances, exerts higher effort in providing public goods when private citizens undertake collective action and coordinate their voluntary contributions towards the same goods. This effect occurs although government and private contributions are assumed to be substitutes in the technology of providing public goods. Using first-hand data on SHGs in India, the paper tests the prediction of the model and shows that, in response to collective action by SHGs, local authorities tackle a larger variety of public issues, and are more likely to tackle issues of interest to SHGs. The findings highlight how the social behavior of SHGs can influence the governance of rural Indian communities.

Keywords: Spatial and Local Economic Development, Regional Economic Development, Subnational Economic Development, Economic Development, Economic Growth, Technology Innovation, Industrial Economics, Economic Theory & Research, Technology Industry

Suggested Citation

Casini, Paolo and Vandewalle, Lore and Wahhaj, Zaki, Public Good Provision in Indian Rural Areas: The Returns to Collective Action by Microfinance Groups (August 19, 2015). World Bank Policy Research Working Paper No. 7397, Available at SSRN: https://ssrn.com/abstract=2647708

Paolo Casini (Contact Author)

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

Lore Vandewalle

Graduate Institute of International and Development Studies (IHEID) - Department of Economics ( email )

Geneva Avenue de la Paix 11A
Geneva, 1202
Switzerland

University of Oslo ( email )

PO Box 6706 St Olavs plass
Oslo, N-0317
Norway

Zaki Wahhaj

University of Kent - Department of Economics ( email )

Keynes College
Kent, CT2 7NP
United Kingdom

University of Namur ( email )

8 Rempart de la Vierge
Namur, 5000
Belgium

University of Kent - School of Economics ( email )

CT2 7NP
United Kingdom

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