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This “paper critically evaluates the design of India's Anti-poverty programmes. In recent years, successive Indian Governments have sought to improve the performance of these programmes by decentralizing their administration, vesting village governments with greater responsibility for their monitoring and oversight. An academic literature hypothesizes that socioeconomic divisions within villages and the weak political strength of the poor reduces the effectiveness of decentralized programmes since, under these conditions, elites are able to ‘capture’ funds intended for the poor. This paper argues that the effect of administrative decentralization of poverty programmes and local public goods on the magnitude of benefits to the poor depends not just on their political strength but also on the incentives the non-poor have to improve the welfare of the poor. The design of policy pays insufficient attention to such incentive issues. Empirical analysis provides support for this belief. The regression analysis of the paper reveals that welfare receipts affect the labour supply decisions of the poor and that the implementation of welfare programmes under control of village governments takes these effects into account
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