than the mechanisms through which special interest capture is sustained in rich countries with strong institutions, both types of capture of public policies, despite underlying preferences among citizens for more public goods, are sustained by manipulating voting behavior on the supply side.

The conclusion for developing countries is that citizens vote on the basis of material considerations— whether they are provided cash, a gift, a job, or more generally, a private benefit from public resources (Hicken, 2011). A related strand of literature has examined the role of ethnic identity in sustaining clientelist political mobilization, with some debate over whether the mechanisms of negative impact of identity politics on public goods provision are through diversity of preferences over public goods, or, through ethnic nepotism (Lieberman and McClendon, 2013; Habyarimana et al, 2009; Banerjee and Pande, 2007; Posner, 2005). The mechanisms of impact of identity could thus work through preferences for different public policies, or at least, different heuristics over evaluating public policies (as in the argument of Lieberman and McClendon, 2013), or through political mobilization on the basis of targeting private benefits to ethnic groups. I interpret this last channel—political mobilization on the basis of identity-targeted benefits—as linked to lower preferences for public goods, shared in common across ethnic groups, compared to private benefits from public policies. This is consistent with the model in Banerjee and Pande (2007), and with the very different implications of identity in the work of Singh (2015), when identity is associated with greater preferences for social welfare.<sup>17</sup> These factors, of voting behavior by non-elite citizens, on the basis of identity, and/or the receipt of private benefits, could explain both sub-optimal policy outcomes, such as subsidized or free electricity, as well as weak institutions, such as patronage-ridden bureaucracies, crony capitalism, and pervasive and costly state intervention in markets. These factors can also endogenize elite capture—preferences among non-elite citizens for private benefits from public policies allows some elites to then select political strategies of clientelism and populism and defeat more well-intentioned contenders.

To illustrate this point of how preferences of non-elite citizens can explain sub-optimal policy outcomes, let’s return to the earlier example of energy subsidies. Assuming that the experts are correct that policies of energy and fuel subsidies are inefficient policies, a common view based on the regressive incidence of energy subsidies is that subsidies are a form of elite capture in poor countries (Clements et al, 2013). But there is no evidence to distinguish whether subsidy policies are due to capture by elites or organized special interests; or, due to informational and cognitive constraints among citizens about the costs of these policies; or, due to ideological beliefs about the value of such policies. The latter two channels— cognitive constraints among lay citizens, and ideological beliefs—would both feed into shaping preferences of citizens on the demand side for price subsidies. Citizens may support energy subsidies because of beliefs that these are “pro-poor” policies and that governments _should_ pursue price controls.<sup>18</sup> Some evidence of citizen demand for price controls comes from a question we asked in a survey of citizens in Tanzania that was undertaken in March 2016: “How strongly do you agree/disagree

> 17 I return further below to the “strategy-selection” mechanism through which ethnicity can work, as in the research of Habyarimana et al (2009).

> 18 Citizens may also come to expect these subsidies as entitlements, the rents they would not be willing to give-up because if they do they may get nothing else in exchange from elites. This class of explanation is consistent with those of costly bargaining among different political groups. Further below, I discuss how one general explanation for sub-optimal policies is akin to the prisoner’s dilemma in game theory—all actors would prefer another outcome but are stuck in a suboptimal one because of beliefs about how others are behaving.

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