Madagascar is one of the poorest countries in Africa. Recently a significant amount of oil was discovered and production started in 2012. With a just distribution of the income from natural resources it has the potential to significantly decrease poverty. This thesis looks into patronage, which is an aspect of local institutions. Patronage influences distribution in terms of allocation of development programs in Madagascar. This thesis contributes to the literature in two aspects: firstly, by measuring economic activity to identify patronage, secondly, by looking into whether there is patronage in Madagascar over a longer period from 1992 to 2010.
The thesis uses satellite light data, measuring light density as a proxy for economic activity. The method used is a difference in difference approach, using a relative luminosity to analyze changes in trends of economic activity in each president’s region relative to the whole country over time. The use of the difference in difference approach allows controlling for factors that influence the whole country. Another method used is a local analysis measuring changes in light density in the home towns of the presidents when they enter and when they leave office.
The results suggest patronage towards nearly all home regions of the presidents during the period. The identification of such a mechanism, that does not benefit the poor in the country, prior to receiving massive incomes from oil production, will contribute to an important debate about distributive mechanisms in Madagascar.