**Participatory budgeting is linked to positive impacts on poverty reduction through its ability to redirect budget allocations to pro-poor investments and better implement them** . In the previous section, we presented evidence that PB can increase budget allocations to propoor projects and that it can also lead to smoother implementation of related projects. The studies below demonstrate the final link to poverty impact and how the pro-poor projects implemented due to PB alleviated poverty to a degree under certain conditions.

**PB was significantly related to reducing extreme poverty.** Baiocchi, Heller, Chaudhuri and Silva (2006) show that implementing participatory budgeting in 5,507 municipalities in Brazil translated into direct, tangible developmental benefits for the poor. Municipalities with PB were compared to those without PB to determine whether municipalities’ performance improved due to PB over time. The statistical analysis showed that on average, PB increased progress in reducing extreme poverty by more than 40%, controlling for all other factors (initial condition and selection bias). There were overall improvements in the economy as well as for the poor. For example, there was a raised index of progress in reducing the GINI coefficient of income inequality by .05%, and a reduced share of income earned by the richest ten percent by over five percentage points.

**PB contributed to improved development outcomes.** The study by Baiocchi et al. (2006) found that participatory budgeting led to significant improvements in services for the poor including an increase in the percentage of municipal expenditures to health and sanitation; raised index of progress towards universal access to the municipal water network; and a raised index of progress in reducing overall poverty and also specifically among children. Goncalves (2013) similarly confirmed that the adoption of participatory budgeting at the municipal level is associated with increased expenditures on basic sanitation and health services and that this reallocation led to a significant reduction in infant mortality. The analysis was based on a panel data set comprising municipal level information on the adoption of participatory budgeting, public expenditures and health outcomes in Brazil from 1990 to 2004

# **_Indicators_**

**_Participatory budgeting outcomes_** were operationalized by Baiocchi et al. (2006) along four dimensions: municipal finances, public service delivery, human development, and growth and inequality. The indicators were measured as follows.

- _Municipal finance_ : Share of capital expenditures; Share of expenditures on education and crime; health and sanitation; housing and urban development; social assistance and pensions; and share of the budget deficit

- _Public service delivery:_ Percentage of population with access to basic public services including: municipal trash collection services sanitation systems, water systems and electricity connection

- _Human development_ : Human Development Index, infant mortality rate (per 1,000), under-five mortality rate (per 1,000), percentage of children ages who are not in school by age group (7-14 or 15-17)

- _Growth and inequality_ : per capita annual income; percentage of population who are poor, percentage of population who are indigent, percentage of children ages 14 and below who are poor, and/or who are indigent; Income share (%) of poorest 20% of population;

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