Public Good Provision in Indian Rural Areas: The Returns to Collective Action by Microfinance Groups. (24th August 2015)

• Record Type: Journal Article
• Authors: Casini, Paolo; Vandewalle, Lore; Wahhaj, Zaki
• Is Part Of: World Bank economic review. Volume 31:Number 1(2017)
• Page Start: 97
• Page End: 128
• Publication Date: 2015-08-24
• Subjects: SHGs -- Public Goods; Economic development -- Periodicals; Developing countries -- Economic conditions -- Periodicals; Developing countries -- Economic policy -- Periodicals; 330.91724
• DOI: 10.1093/wber/lhv041
• Languages: English
• ISSNs: 0258-6770

Abstract

Abstract: Self-help groups (SHGs) are the most common form of microfinance in India. We provide evidence that SHGs, composed of women only, undertake collective actions for the provision of public goods within village communities. Using a theoretical model, we show 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 firsthand data on SHGs in India, we test the prediction of the model and show 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. Our findings highlight how the social behavior of SHGs can influence the governance of rural Indian communities.