Citizens' Preferences and the Portfolio of Public Goods: Evidence from Nigeria

Developing countries have undertaken decentralization reforms to increase the efficiency of public goods' provisioning. By tailoring the goods to the preferences of smaller groups, the reforms aim to ensure that the resulting supply of public goods matches local demands. We analyze if local politicians tasked with supplying public goods in a developing country respond to citizens' preferences. We ask two questions: First, faced with demands for increased spending on a particular type of public good, will politicians increase the overall spending on public goods or keep it constant while reallocating resources between different public goods? Second, if politicians reallocate resources rather than increase overall spending, which public good will receive additional funds at the expense of another good? We examine these questions using sub-national spending and preference data in Nigerian districts. Our empirical strategy accounts for interdependency between spending areas as increased spending in one area can be offset by decreasing expenditures elsewhere. We find that local politicians reallocate resources across education, health, infrastructure, and agricultural support to match the preference profile of citizens across these goods but do not increase overall spending for public goods. (C) 2016 Elsevier Ltd. All rights reserved.