A Signaling Theory of Distributive Policy Choice: Evidence from Senegal

A recent literature emphasizes political economy factors behind the wave of administrative splits across the developing world. While previous studies have focused on why some groups are more likely to obtain new administrative units, they do not explain why vote-maximizing incumbents use this arguably less efficient policy in the first place. We contribute to this literature by embedding administrative splits within incumbents' broader electoral strategy of distributive policies. We develop a model in which incumbents target local public goods to groups for whom this is a credible signal of commitment, namely, those with a history of reciprocal relationship. When incumbents face increased electoral competition, however, other groups require a stronger signal, which is emitted by the costly creation of new units that reduces the cost of future transfers to those groups. We test our theory using electoral and public goods data from Senegal and find robust support for its predictions.