Publications

2014
Khwaja, Asim Ijaz, Tahir Andrabi, and Jishnu Das. 2014.

Report cards: the impact of providing school and child test scores on educational markets

.Abstract
We study the impact of providing school and child test scores on subsequent test scores, prices, and enrollment in markets with multiple public and private providers. A randomly selected half of our sample villages (markets) received report cards. This increased test scores by 0.11 standard deviations, decreased private school fees by 17 percent and increased primary enrollment by 4.5 percent. Heterogeneity in the treatment impact by initial school quality is consistent with canonical models of asymmetric information. Information provision facilitates better comparisons across providers, improves market efficiency and raises child welfare through higher test scores, higher enrollment and lower fees.
reportcards_june2014.pdf
Iyer, Rajkamal, Asim Ijaz Khwaja, Erzo FP Luttmer, and Kelly Shue. 2014.

Screening peers softly: Inferring the quality of small borrowers

.Abstract
This paper examines the performance of new online lending markets that rely on non-expert individuals to screen their peers’ creditworthiness. We find that these peer lenders predict an individual’s likelihood of defaulting on a loan with 45% greater accuracy than the borrower’s exact credit score (unobserved by the lenders). Moreover, peer lenders achieve 87% of the predictive power of an econometrician who observes all standard financial information about borrowers. Screening through soft or nonstandard information is relatively more important when evaluating lower quality borrowers. Our results highlight how aggregating over the views of peers and leveraging nonstandard information can enhance lending efficiency
cid_working_paper_no._rwp13-017_khwaja_2013.pdf
2013
Hanna, Rema, and Shing-yi Wang. 2013.

Dishonesty and selection into public service

.Abstract
In this paper, we demonstrate that university students who cheat on a simple task in a laboratory setting are more likely to state a preference for entering public service. Importantly, we also show that cheating on this task is predictive of corrupt behavior by real government workers, implying that this measure captures a meaningful propensity towards corruption. Students who demonstrate lower levels of prosocial preferences in the laboratory games are also more likely to prefer to enter the government, while outcomes on explicit, two-player games to measure cheating and attitudinal measures of corruption do not systematically predict job preferences. We find that a screening process that chooses the highest ability applicants would not alter the average propensity for corruption among the applicant pool. Our findings imply that differential selection into government may contribute, in part, to corruption. They also emphasize that screening characteristics other than ability may be useful in reducing corruption, but caution that more explicit measures may offer little predictive power.
cid_working_paper_no._244_hanna_2012.pdf
Pande, Rohini, Ben Feigenberg, Erica Field, John Papp, and Natalia Rigol. 2013.

Does the Classic Micro nance Model Discourage Entrepreneurship Among the Poor? Experimental Evidence from India

. Review of Economic Studies 80, no. 4: 1459-1483. Publisher's VersionAbstract
Do the repayment requirements of the classic micro finance contract inhibit investment in high-return but illiquid business opportunities among the poor? Using a field experiment, we compare the classic contract which requires that repayment begin immediately after loan disbursement to a contract that includes a two-month grace period. The provision of a grace period increased short-run business investment and long-run pro ts but also default rates. The results, thus, indicate that debt contracts that require early re-payment discourage illiquid risky investment and thereby limit the potential impact of micro finance on micro enterprise growth and household poverty.
review_of_economic_studies_vol_80_no_4_pande_2013.pdf
Hanna, Rema, Vivi Alatas, Abhijit Banerjee, Benjamin A Olken, Ririn Purnamasari, and Matthew Wai-Poi. 2013.

Ordeal mechanism in targeting: theory and evidence from a field experiment in Indonesia

.Abstract
This paper explores whether ordeal mechanisms can improve the targeting of aid programs to the poor ("self-targeting"). We first show that theoretically the impact of increasing ordeals is ambiguous: for example, time spent applying imposes a higher monetary cost on the rich, but may impose a higher utility cost on the poor. We examine these issues by conducting a 400-village field experiment with Indonesia’s Conditional Cash Transfer program (PKH), where eligibility is determined through an asset test. Specifically, we compare targeting outcomes from self-targeting, where villagers came to a central site to apply and take the asset test, against the status quo, an automatic enrollment system among a pool of potential candidates that the village pre-identified. Within self-targeting villages, we find that the poor are more likely to apply, even conditional on whether they would pass the asset test. Exploiting the experimental variation, we find that self-targeting leads to a much poorer group of beneficiaries than the status quo. Selftargeting also outperforms a universal asset-based automatic enrollment system that we construct using our survey data. However, while experimentally increasing the distance to the application site reduces the number of applicants, it does not differentially improve targeting. Estimating our model structurally, we show that there are large unobserved shocks in the decision to apply, and therefore increasing waiting times to 9 hours or more would be required to induce detectable additional selection. In short, ordeal mechanisms can induce self-selection, but marginally increasing the ordeal can impose additional costs on applicants without necessarily improving targeting.
cid_working_paper_no._254_hanna_2012.pdf
Levy, Dan, Harounan Kazianga, Leigh Linden, and Matt Sloan. 2013.

The effects of "girl-friendly schools": evidence from the BRIGHT School Construction Program in Burkina Faso

. American Economic Journal of Applied Economics 5, no. 3: 41-62. Publisher's VersionAbstract
We evaluate a 'girl-friendly' primary school program in Burkina Faso using a regression discontinuity design. After 2.5 years, the program increased enrollment by 19 percentage points and increased test scores by 0.41 standard deviations. For those caused to attend school, scores increased by 2.2 standard deviations. Girls' enrollment increased by 5 percentage points more than boys' enrollment, but they experienced the same increase in test scores as boys. The unique characteristics of the schools are responsible for increasing enrollment by 13 percentage points and test scores by 0.35 standard deviations. They account for the entire difference in the treatment effects by gender.
Duflo, Esther, Michael Greenstone, Rohini Pande, and Nicholas Ryan. 2013.

Truth-Telling by Third-party Auditors and the Response of Polluting Firms: Experimental Evidence from India

. Quarterly Journal of Economics 128, no. 4: 1-48. Publisher's VersionAbstract
In many regulated markets, private, third-party auditors are chosen and paid by the firms that they audit, potentially creating a conflict of interest. This paper reports on a two- year field experiment in the Indian state of Gujarat that sought to curb such a conflict by altering the market structure for environmental audits of industrial plants to incentivize accurate reporting. There are three main results. First, the status quo system was largely corrupted, with auditors systematically reporting plant emissions just below the standard, although true emissions were typically higher. Second, the treatment caused auditors to report more truthfully and very significantly lowered the fraction of plants that were falsely reported as compliant with pollution standards. Third, treatment plants, in turn, reduced their pollution emissions. The results suggest reformed incentives for third-party auditors can improve their reporting and make regulation more effective.
quarterly_journal_of_economics_vol_128_no_4_pande_2013.pdf
Duflo, Esther, Michael Greenstone, Rohini Pande, and Nichols Ryan. 2013.

What Does Reputation Buy? Differentiation in a Market for Third-party Auditors

. American Economic Review 103, no. 3: 314-319. Publisher's VersionAbstract
We study differences in quality in the market for third-party environmental auditors in Gujarat, India. We find that, despite the low overall quality, auditors are heterogeneous and some perform well. We posit that these high-quality auditors survive by using their good name to insulate select client plants from regulatory scrutiny. We find two pieces of evidence broadly consistent with this hypothesis: (i) though estimates are not precise, higher-quality auditors appear to be paid more both in their work as third-party auditors and in their complementary work as consultants; and (ii) plants with high-quality auditors incur fewer costly penalties from the regulator.
american_economic_review_vol_103_no_3_pande_2013.pdf
Chandra, Amitabh, Maurice Dalton, and Jonathan Holmes. 2013.

Large Increases in Spending on Postacute Care in Medicare to the Potential for Cost Savings in These Settings

. Health Affairs 32, no. 5: 864-872. Publisher's VersionAbstract
Identifying policies that will cut or constrain US health care spending and spending growth dominates reform efforts, yet little is known about whether the drivers of spending levels and of spending growth are the same. Policies that produce a one-time reduction in the level of spending, for example by making hospitals more efficient, may do little to reduce subsequent annual spending growth. To identify factors causing health care spending to grow the fastest, we focused on three conditions in the Medicare population: heart attacks, congestive heart failure, and hip fractures. We found that spending on postacute care—long-term hospital care, rehabilitation care, and skilled nursing facility care—was the fastest growing major spending category and accounted for a large portion of spending growth in 1994–2009. During that period average spending for postacute care doubled for patients with hip fractures, more than doubled for those with congestive heart failure, and more than tripled for those with heart attacks. We conclude that policies aimed at controlling acute care spending, such as bundled payments for short-term hospital spending and physician services, are likely to be more effective if they include postacute care, as is currently being tested under Medicare’s Bundled Payment for Care Improvement Initiative.
Hanna, Rema, Vivi Alatas, Abhijit Banerjee, Benjamin A Olken, Ririn Purnamasari, and Matthew Wai-Poi. 2013.

Does Elite Capture Matter? Local Elites and Targeted Welfare Programs in Indonesia

.Abstract
This paper investigates the impact of elite capture on the allocation of targeted government welfare programs in Indonesia, using both a high-stakes field experiment that varied the extent of elite influence and non-experimental data on a variety of existing government transfer programs. Conditional on their consumption level, there is little evidence that village elites and their relatives are more likely to receive aid programs than non-elites. Looking more closely, however, we find that this overall result masks a difference between different types of elites: those holding formal leadership positions are more likely to receive benefits, while informal leaders are actually less likely to. We show that capture by formal elites occurs during the distribution of benefits under the programs, and not during the processes when the beneficiary lists are determined by the central government. However, while elite capture exists, the welfare losses it creates appear quite small: since formal elites and their relatives are only 9 percent richer than non-elites, are at most about 8 percentage points more likely to receive benefits than non-elites, and represent at most 15 percent of the population, eliminating elite capture entirely would improve the welfare gains from these programs by less than one percent.
cid_working_paper_no._255_hanna_2013.pdf
2012
Banerjee, Abhijit, Rema Hanna, and Sendhil Mullainathan. 2012.

Corruption

. The Handbook of Organizational Economics. Princeton University Press. Publisher's VersionAbstract
In this paper, we provide a new framework for analyzing corruption in public bureaucracies. The standard way to model corruption is as an example of moral hazard, which then leads to a focus on better monitoring and stricter penalties with the eradication of corruption as the final goal. We propose an alternative approach which emphasizes why corruption arises in the first place. Corruption is modeled as a consequence of the interaction between the underlying task being performed by bureaucrat, the bureaucrat's private incentives and what the principal can observe and control. This allows us to study not just corruption but also other distortions that arise simultaneously with corruption, such as red-tape and ultimately, the quality and efficiency of the public services provided, and how these outcomes vary depending on the specific features of this task. We then review the growing empirical literature on corruption through this perspective and provide guidance for future empirical research.
corruption_20120409.pdf
Hanna, Rema, Eva Arceo, and Paulina Oliva. 2012.

The effect of pollution on labor supply: evidence from a natural experiment in Mexico

.Abstract
Much of what we know about the marginal effect of pollution on infant mortality is derived from developed country data. However, given the lower levels of air pollution in developed countries, these estimates may not be externally valid to the developing country context if there is a nonlinear dose relationship between pollution and mortality or if the costs of avoidance behavior differs considerably between the two contexts. In this paper, we estimate the relationship between pollution and infant mortality using data from Mexico. We find that an increase of 1 parts per billion in carbon monoxide (CO) over the last week results in 0.0032 deaths per 100,000 births, while a 1 μg/m3 increase in particulate matter (PM10) results in 0.24 infant deaths per 100,000 births. Our estimates for PM10 tend to be similar (or even smaller) than the U.S. estimates, while our findings on CO tend to be larger than those derived from the U.S. context. We provide suggestive evidence that a non-linearity in the relationship between CO and health explains this difference.
cid_working_paper_no._225_hanna_2011.pdf
An, Li, Jianguo Liu, Frank Lupi, Ryan Sheely, and Andres Vina. 2012.

Agent-based modeling of the effects of social norms on enrollment in payments for ecosystem services

. Ecological Modelling 229: 16-24. Publisher's VersionAbstract
Conservation investments are increasingly being implemented through payments for ecosystem services (PES) for the protection and restoration of ecosystem services around the world. Previous studies suggested that social norms have substantial impacts on environmental behaviors of humans, including enrollment of PES programs. However, it is still not well understood how social norms are affected by the design of PES programs and how the evolution of social norms may affect the efficiency of conservation investments. In this paper, we developed an agent-based simulation model to demonstrate the evolution and impacts of social norms on the enrollment of agricultural land in a PES program. We applied the model to land plots that have been enrolled in China's Grain-to-Green Program (GTGP) to examine reenrollment in an alternative payment program when the current payments ceased. The study was conducted in Wolong Nature Reserve where several thousand plant and animal species, including giant pandas, may benefit from the reenrollment. We found that over 15% more GTGP land can be reenrolled at the same payment if social norms were leveraged by allowing more than 10 rounds of interactions among landholders regarding their reenrollment decisions. With only three rounds of interactions, an additional 7.5% GTGP land was reenrolled at the same payment due to the effects of social norms. In addition, the effects of social norms were largest at intermediate payments and were smaller at much higher or much smaller payments. Even in circumstances where frequent interactions among landholders about their enrollment decisions are not feasible, policy arrangements that divide households into multiple waves for sequential enrollment can enroll over 11% more land at a given payment level. The approach presented in this paper can be used to improve the efficiency of existing PES programs and many other conservation investments worldwide.
Hanna, Rema, and Leigh L Linden. 2012.

Discrimination in grading

. American Economic Journal: Economic Policy 4, no. 4: 146-168. Publisher's VersionAbstract
We report the results of an experiment that was designed to test for discrimination in grading in India. We recruited teachers to grade exams. We randomly assigned child "characteristics" (age, gender, and caste) to the cover sheets of the exams to ensure that there is no relationship between these observed characteristics and the exam quality. We find that teachers give exams that are assigned to be lower caste scores that are about 0.03 to 0.08 standard deviations lower than those that are assigned to be high caste. The teachers' behavior appears consistent with statistical discrimination.
american_economic_journal_vol_4_no_4_hanna_2012.pdf
Pande, Rohini, Erica Field, John Papp, and Natalia Rigol. 2012.

Does the classic microfinance model discourage entrepreneurship among the poor? Experimental evidence from India.

. American Economic Review 103, no. 6: 2196-2226. Publisher's VersionAbstract
Do the repayment requirements of the classic micro finance contract inhibit invest-ment in high-return but illiquid business opportunities among the poor? Using a field experiment, we compare the classic contract which requires that repayment begin immediately after loan disbursement to a contract that includes a two-month grace period. The provision of a grace period increased short-run business invest-ment and long-run pro ts but also default rates. The results, thus, indicate that debt contracts that require early repayment discourage illiquid risky investment and thereby limit the potential impact of microfi nance on microenterprise growth and household poverty.
american_economic_review_vol_103_no_6_pande_2013.pdf
Hanna, Rema, Vivi Alatas, Abhijit Banerjee, Arun G Chandrasekhar, and Benjamin A Olken. 2012.

Network Structure and the Aggregation of Information: Theory and Evidence from Indonesia

.Abstract
We use a unique data-set from Indonesia on what individuals know about the income distribution in their village to test theories such as Jackson and Rogers (2007) that link information aggregation in networks to the structure of the network. The observed patterns are consistent with a basic diffusion model: more central individuals are better informed and individuals are able to better evaluate the poverty status of those to whom they are more socially proximate. To understand what the theory predicts for cross-village patterns, we estimate a simple diffusion model using within-village variation, simulate network-level diffusion under this model for the over 600 different networks in our data, and use this simulated data to gauge what the simple diffusion model predicts for the cross-village relationship between information diffusion and network characteristics (e.g. clustering, density). The coefficients in these simulated regressions are generally consistent with relationships suggested in previous theoretical work, even though in our setting formal analytical predictions have not been derived. We then show that the qualitative predictions from the simulated model largely match the actual data in the sense that we obtain similar results both when the dependent variable is an empirical measure of the accuracy of a village’s aggregate information and when it is the simulation outcome. Finally, we consider a real-world application to community based targeting, where villagers chose which households should receive an anti-poverty program, and show that networks with better diffusive properties (as predicted by our model) differentially benefit from community based targeting policies.
cid_working_paper_no._246_hanna_2012.pdf
Yanagizawa-Drott, David. 2012.

Propaganda and conflict: theory and evidence from the Rwandan genocide

.Abstract
This paper investigates the role of mass media in times of conflict and state-sponsored violence. A model of collective violence is presented where mass media has the potential to increase participation in conflict by facilitating coordination, in addition to any direct effect on behavior due to content. Guided by the insights of the model, the paper uses a unique nation-wide village-level dataset from the Rwandan Genocide to estimate the impact of radio broadcasts that called for the extermination of the Tutsi minority, and are commonly believed to have played a signi…ficant role in fueling the violence. The results show that the broadcasts increased participation in the killings. They indicate that approximately 10 percent, or an estimated 51,000 perpetrators, of the participation in the violence during the Rwandan Genocide can be attributed to the effects of the radio. Violence that inherently requires more coordination, such as militia and army violence, was also more affected by the broadcasts. Together with a set of results presented in the paper, the evidence indicates that mass media can in part affect conflict by functioning as a coordination device.
cid_working_paper_no._257_drott_2012.pdf
Chandra, Amitabh, Katherine Baicker, and Jonathan S Skinner. 2012.

Saving money or just saving lives? improving the productivity of US health care spending

. Annual Review of Economics 4: 33-56. Publisher's VersionAbstract
There is growing concern over the rising share of the US economy devoted to health care spending. Fueled in part by demographic transitions, unchecked increases in entitlement spending will necessitate some combination of substantial tax increases, elimination of other public spending, or unsustainable public debt. This massive increase in health spending might be warranted if each dollar devoted to the health care sector yielded real health benefits, but this does not seem to be the case. Although we have seen remarkable gains in life expectancy and functioning over the past several decades, there is substantial variation in the health benefits associated with different types of spending. Some treatments, such as aspirin, beta blockers, and flu shots, produce a large health benefit per dollar spent. Other more expensive treatments, such as stents for cardiovascular disease, are high value for some patients but poor value for others. Finally, a large and expanding set of treatments, such as proton-beam therapy or robotic surgery, contributes to rapid increases in spending despite questionable health benefits. Moving resources toward more productive uses requires encouraging providers to deliver and patients to consume high-value care, a daunting task in the current political landscape. But widespread inefficiency also offers hope: Given the current distribution of resources in the US health care system, there is tremendous potential to improve the productivity of health care spending and the fiscal health of the United States.
Chandra, Amitabh, Jinkook Lee, P Arokiasamy, Peifeng Hu, Jenny Liu, and Kevin Feeney. 2012.

Markers and drivers: cardiovascular health of middle-aged and older indians

. Aging in Asia: findings from new and emerging data initiatives. The National Academies Press. Publisher's VersionAbstract
Using the 2010 pilot study of the Longitudinal Aging Study in India (LASI), the authors examine the socioeconomic and behavioral risk factors for poor cardiovascular health among middle-aged and older Indians, focusing on self-reported and directly measured hypertension. The LASI pilot survey (N=1,683) was fielded in four states: Karnataka, Kerala, Punjab, and Rajasthan. These four states were chosen to capture regional variations and socioeconomic and cultural differences. They find significant inter-state differences across multiple measures of cardiac health and risk factors for hypertension, including body mass index, waist-to-hip ratio, and health behaviors. In contrast to the findings from developed countries, they find education and other markers of higher socioeconomic status (SES) to be positively associated with hypertension. Among the hypertensive, however, they find that those at higher SES are less likely to be undiagnosed and more likely to be in better control of their blood pressure than respondents with low SES. They also find significant inter-state variations in hypertension prevalence, diagnosis, and management that remain even after accounting for socio economic differences, obesity, and health behaviors. They conclude by discussing these findings and their implications for public health and economic development in India and the developing country context more generally.
Bjorkman-Nyqvist, Martina, Jakob Svensson, and David Yanagizawa-Drott. 2012.

The market for (fake) antimalarial medicine: evidence from Uganda

.Abstract
Counterfeit and sub-standard antimalarial drugs present a growing threat to public health. This paper investigates the mechanisms that determine the prevalence of fake antimalarial drugs in local markets, their effects, and potential interventions to combat the problem. We collect drug samples from a large set of local markets in Uganda using covert shoppers and employ Raman spectroscopy to test for drug quality. We find that 37 percent of the local outlets sell fake antimalarial drugs. Motivated by a simple model, we conduct a market-level experiment to test whether authentic drugs can drive out fake drugs from the local market. We find evidence of such externalities: the intervention reduced prevalence of substandard and counterfeit drugs in incumbent outlets by half. We also provide suggestive evidence that misconceptions about malaria lead consumers to overestimate antimalarial drug quality, and that opportunistic drug shops exploit these misconceptions by selling substandard and counterfeit drugs. Together, our results indicate that high quality products can drive out low quality ones, but the opposite is true when consumers are less able to infer product quality.
cid_working_paper_no._242_drott_2012.pdf