The Political Economy of Attracting Public Funds: The Case of Lebanon

Using a new exceptional dataset on 80 poverty pockets in Lebanon in 2004, we propose to test the confessional and political channels of influence through which these pockets are potentially able to attract development assistance. Lebanon constitutes a perfect case study for the interaction of identity-based polarization and fractionalization (based on confession) and poverty in the context of a developing country. We investigate the effect on the level of development assistance funds transferred to municipal governments of polarization, fractionalization and sectarian distance at the level of the poverty pockets and find robust results indicating that polarization and fractionalization are significant determinants of a pocket’s ability to attract funding. We also find that one of our measures of sectarian distance, the share in the larger district of a poverty pocket’s largest sect, also generates more revenue for the pocket. Pockets with a mix of sects have greater ease in attracting funds, which is consistent with the prerogative of confessional balance in government policy dictated by the power-sharing game in the post-war era. The results are robust to the inclusion of a wide variety of controls. They put into question the design of effective channels to allocate development funds in polarized societies.