The welfare outcomes of decentralized federal programs aiming to reduce poverty nationally will depend on the reactions of diverse provincial governments. Central targeting of poor provinces improved under World Bank sponsored reforms to an Argentinean anti-poverty program. However, provincial ability at reaching poor areas was a more important factor in overall success. There was diverse, but largely explicable, performance across provinces. Local program history mattered. Controlling for this, poorer provinces were less effective at targeting their poor areas. This was mitigated by the center’s spending. But the latter did not provide adequate incentives for provincial targeting effort. Decentralization generated substantial horizontal inequality in public spending on poor areas
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