Many argue that organizations of the disadvantaged create positive externalities, and in particular strengthen the position of these groups in society. A natural inference is that these organizations should be subsidized. We argue that the benefits of expanding the operations of these groups must be set against the potential costs of weakening the role of the disadvantaged in these organizations. A prospective, randomized evaluation of a development program targeted at strengthening rural women’s groups in western Kenya suggests that the program did not improve group strength or functioning as measured by participation rates, assistance to members, and assistance to other community projects. The funding did, however, change the very characteristics of the groups that made them attractive to funders in the first place. Younger, more educated women and women employed in the formal sector joined the groups, and men and better-educated and wealthier women moved into key leadership positions.
Kenya’s education system blends substantial centralization with elements of local control and school choice. This paper argues that the system creates incentives for local communities to build too many small schools; to spend too much on teachers relative to non-teacher inputs; and to set school fees that exceed those preferred by the median voter and prevent many children from attending school. Moreover, the system renders the incentive effects of school choice counterproductive by undermining the tendency for pupils to switch into the schools with the best headmasters. A randomized evaluation of a program operated by a non-profit organization suggests that budget-neutral reductions in the cost of attending school and increases in non-teacher inputs, financed by increases in class size, would greatly reduce dropout rates without reducing test scores. Moreover, evidence based on transfers into and out of program schools suggests that the population would prefer such a reallocation of expenditures.