understanding of this relationship calls for looking at both the quantitative allocations of the budget (by sector, item, or project) and at the qualitative outputs that those allocations generate. For example, a large portion of the budget could go to education, but if most of those resources go to increase the benefits of the teacher unions, that spending allocation may not have direct benefits for the poor<sup>22</sup> , and (ii) supposing that local governments have rightly identified the type of spending that benefits the poor, the remaining challenge is to ensure that the expenditures actually reach the intended beneficiaries. Literature on decentralization examining this implementation problem has found that local actors do not have equal capacities and opportunities. More powerful groups are in a better position to shift public spending – and public decisions altogether– to their favor, a situation commonly referred to as “elite or local capture.” According to research, if communities or the state cannot influence or control the actions and power of local leadership, this often leads to investments which benefit elite interests and an under-investment in public good and services for the poor (Von Braun 2000).<sup>23</sup> In China, for example, the existence of a powerful elite is associated with the high increase in the Gini coefficient from 1980 t0 1995. Similarly, according to Von Braun (2000: 15) in India "the elite, particularly those from higher castes, are mostly seen as those who divert government resources for their own use. In some areas, local leader are seen as selfish and corrupt and area cited as one of the reasons for lack of development in the area." Thus, both because of lack of consideration of the qualitative outputs of budgets and because of elite capture problems, empowerment may not instrumentally serve the poor. However, in cases where large numbers of people (e.g. woman, ethnic minorities) are excluded from the public decision that affect their life, empowerment may be a valued outcome in its own right. Besides, the analytic division between the intrinsic and the instrumental approaches to empowerment is not definitive. In fact, both approaches to empowerment appear to be closely associated. Intrinsically disempowered individuals or groups are also likely to be instrumentally disempowered. Similarly, intrinsically empowered individuals or groups are also likely to be instrumentally empowered.

# **5. Conclusion: practical implications and further research**

The focus of this paper has been largely theoretical, but there are practical implications related to the fiscal determinants of empowerment. The paper suggests a number of ways in

> 22 Thus far, studies of participatory budgeting have not addressed this issue (perhaps for lack of disaggregated data at the subnational level), but without such analysis, it will be difficult to find out if the use of this mechanism benefits the poor. In Porto Alegre and Belo Horizonte in Brazil this problem is partially managed by using a system in which each region's share of total investment is weighted by its level of poverty and infrastructure needs. This guarantees a progressive distribution of resources (Souza 2001).

> 23 From a rational cost-benefit point of view this happens not only because the poor do not have an incentive to engage with government (as they bear all the costs but share the benefits equally), but also because those who participate (those who have positive net benefits of doing so) have interests sufficiently different from the (poor) majority.

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