Khwaja, Asim, Adnan Q. Khan, and Benjamin A. Olken. 2015. “Tax Farming Redux: Experimental Evidence on Performance Pay for Tax Collectors.” Quarterly Journal of Economics. Publisher's VersionAbstract

Performance pay for tax collectors has the potential to raise revenues, but might come at a cost if it increases the bargaining power of tax collectors vis-a-vis taxpayers. We report the first large-scale field experiment on these issues, where we experimentally allocated 482 property tax units in Punjab, Pakistan into one of three performance-pay schemes or a control. After two years, incentivized units had 9.4 log points higher revenue than controls, which translates to a 46 percent higher growth rate. The scheme that rewarded purely on revenue did best, increasing revenue by 12.9 log points (64 percent higher growth rate), with little penalty for customer satisfaction and assessment accuracy compared to the two other schemes that explicitly also rewarded these dimensions. The revenue gains accrue from a small number of properties becoming taxed at their true value, which is substantially more than they had been taxed at previously. The majority of properties in incentivized areas in fact pay no more taxes, but instead report higher bribes. The results are consistent with a collusive setting in which performance pay increases collectors’ bargaining power over taxpayers, who either have to pay higher bribes to avoid being reassessed, or pay substantially higher taxes if collusion breaks down.


Tax Farming Redux: Experimental Evidence of Performance Pay for Tax Collectors Appendix
Callen, Michael, Saad Gulzar, Ali Hasanain, and Yasir Khan. 2014. “The Political Economy of Public Sector Absence: Experimental Evidence from Pakistan”.Abstract

In many developing countries, public sector absence is both common and resistant to reform. One explanation is that politicians preferentially provide public jobs with limited work requirements as patronage. We test this patronage hypothesis in Pakistan using: (i) a randomized evaluation of a novel smartphone absence monitoring technology; (ii) data on election outcomes in the 240 constituencies  where the experiment took place; (iii) attendance recorded during unannounced visits; (iv) surveys of connections between politicians and health staff; and (v) a survey of the universe of health supervisors. Four sets of results are consistent with this view. First, 36 percent of health officers report interference by a politician in the previous year when sanctioning an employee and report this twice as often in uncompetitive constituencies. Second, doctors are 21 percentage points less likely to be present if they know their politician, 32 percentage points less likely to be present if they work in an uncompetitive constituency, and are only at work during 10 percent of normal reporting hours if both conditions are true. Third, the effect of the smartphone monitoring technology, which almost doubled inspection rates, is highly localized to competitive constituencies and to monitored employees who do not know their politician. Last, we find evidence that program impact is in part due to the transmission of information to senior officers. We test this by manipulating the salience of staff absence in data presented to senior officials using an online dashboard. Highlighting absence leads to larger subsequent improvements in attendance for facilities located in a competitive constituencies.

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.

Callen, Michael, Saad Gulzar, Ali Hasanain, Abdul Rehman Khan, Yasir Khan, and Muhammad Zia Mehmood. 2013. “Improving Public Health Delivery in Punjab, Pakistan: Issues and Opportunities.” The Lahore Journal of Economics 18 (SE): 249-269. Publisher's VersionAbstract

Pakistan has a large and dispersed primary public health system that gives citizens access to trained doctors and staff, and to subsidized medicines. However both the use of these facilities and health outcomes remain low. Improvements in information and communications technology provide exciting opportunities to leverage technology to improve management. This paper presents a detailed qualitative and quantitative study of the institutional context in which such interventions in the public health sector in Punjab would be trialed. We describe the structure and management of primary healthcare facilities, present selected results from a survey of a representative sample of basic health units, and identify some key issues. We also report and discuss officials’ responses to the question of how services might be improved.

Khwaja, Asim, Tahir Andrabi, and Jishnu Das. 2011. “The Madrassa Controversy: The Story Does Not Fit The Facts.” Under the Drones: Modern Lives in Afghanistan-Pakistan Borderlands. Eds. Shahzad Bashir and Robert Crews. Harvard University Press, June 2011.Abstract

Over the last few years, US and international foreign policy concerns have focused on the rise of extremism in the Islamic world. Pakistan, considered as pivotal in the war on terror, is mentioned as prominent case. There is by now a widespread conventional narrative surrounding the role of the Pakistani educational system in the rise of religious extremism in the country. The general claim is that the public schooling system in Pakistan is failing especially for the poor. As a result, large numbers are exiting the state system both through attrition or lack of enrollment in the first place. Madrassas have proliferated to fill the vacuum as a result of the Pakistani state and society to provide mainstream schooling opportunities for its children, especially for the poorest segments of the population. This narrative has been presented in the international media and also in policy circles in the United States in many policy studies. The Af-Pak policy framework developed under the Obama administration has also highlighted this point.

Khwaja, Asim Ijaz, Atif R. Mian, and Abid Qamar. 2011. “Bank Credit and Business Networks”. Publisher's VersionAbstract

We construct the topology of business networks across the population of firms in an emerging economy, Pakistan, and estimate the value that membership in large yet diffuse networks brings in terms of access to bank credit and improving financial viability. We link two firms if they have a common director. The resulting topology includes a "giant network" that is order of magnitudes larger than the second largest network. While it displays "small world" properties and comprises 5 percent of all firms, it accesses two-thirds of all bank credit. We estimate the value of joining this giant network by exploiting "incidental" entry and exit of firms over time. Membership increases total external financing by 16.6 percent, reduces the propensity to enter financial distress by 9.5 percent, and better insures firms against industry and location shocks. Firms that join improve financial access by borrowing more from new lenders, particularly those already lending to their (new) giant-network neighbors. Network benefits also depend critically on where a firm connects to in the network and on the firm's pre-existing strength.

Andrabi, Tahir, Jishnu Das, Asim Ijaz Khwaja, and Tristan Zajonc. 2011. “Do Value-Added Estimates Add Value? Accounting for Learning Dynamics.” American Economic Journal of Applied Economics 3 (3): 29-54. Publisher's VersionAbstract

This paper illustrates the central role of persistence in estimating and interpreting value-added models of learning. Using data from Pakistani public and private schools, we apply dynamic panel methods that address three key empirical challenges: imperfect persistence, unobserved heterogeneity, and measurement error. Our estimates suggest that only one-fifth to one-half of learning persists between grades and that private schools increase average achievement by 0.25 standard deviations each year. In contrast, value-added models that assume perfect persistence yield severely downward estimates of the private school effect. Models that ignore unobserved heterogeneity or measurement error produce biased estimates of persistence.

Kwaja, Asim Ijaz, Tahir Andrabi, and Jishnu Das. 2011. “What Did You Do All Day? Maternal Education and Child Outcomes.” Journal of Human Resources 47 (4): 873-912. Publisher's VersionAbstract

Does maternal education have an impact on children’s educational outcomes even at the very low levels found in many developing countries? We use instrumental variables analysis to address this issue in Pakistan. We find that children of mothers with some education spend 72 more minutes per day on educational activities at home. Mothers with some education also spend more time helping their children with school work. In the subset that have test scores available, children whose mothers have some education have higher scores by 0.23–0.35 standard deviations. We do not find support for channels through which education affects bargaining power within the household.

Khwaja, Asim, Tahir R. Andrabi, and Jishnu Das. 2010. “Education Policy in Pakistan: A Framework for Reform.” IGC International Growth Centre – Pakistan, Policy Brief, December 2010. Publisher's VersionAbstract

This policy brief draws on research papers and reports from a large-scale longitudinal study through a grant from the World Bank’s South Asia Regions and Knowledge for Change Trust Funds. The study, titled “Learning and Educational Achievements in Punjab Schools” (LEAPS) analyses the education sector in Pakistan, its major challenges and policy options for moving forward. The data from the study is public and is available at

Mian, Atif, Asim Ijaz Khwaja, and Bilal Zia. 2010. “Dollars Dollars Everywhere, Nor Any Dime to Lend: Credit Limit Constraints on Financial Sector Absorptive Capacity.” The Review of Financial Studies 23 (12): 4281-4323. Publisher's VersionAbstract

We exploit an unexpected inflow of liquidity in an emerging market to study how capital is intermediated to firms. We find that backward-looking credit limit constraints imposed by banks make it difficult for firms to borrow, despite readily available bank liquidity, healthy aggregate demand, and a sharply falling cost of capital. The resulting aggregate failure to extend and retain capital in the economy suggests that agency costs that force banks to rely on sticky balance-sheet-based credit limits prevent emerging economies from effectively intermediating capital.

Khwaja, Asim, Tahir Andrabi, Jishnu Das, and C. Christine Fair. 2009. “The Madrasa Myth.” Foreign Policy, Aug 27 2009. Publisher's VersionAbstract

On May 3, 2009 the New York Times published a lengthy description of Pakistan's education system. The article, like so many before it, rehearsed a well-known narrative in which government schools are failing while madrasas are multiplying, providing a modicum of education for Pakistan's poorest children.

Khwaja, Asim Ijaz. 2009. “Can Good Projects Succeed in Bad Communities?.” Journal of Public Economics 93 (7-8): 899-916. Publisher's VersionAbstract

The lack of “social capital” is frequently given as an explanation for why communities perform poorly. Yet to what extent can project design compensate for these community-specific constraints? I address this question by examining determinants of collective success in a costly problem for developing economies — the upkeep of local public goods. It is often difficult to obtain reliable outcome measures for comparable collective tasks across well-defined communities. In order to address this I conducted detailed surveys of community-maintained infrastructure projects in Northern Pakistan. The findings show that while community-specific constraints do matter, their impact can be mitigated by better project design. Inequality, social fragmentation, and lack of leadership in the community do have adverse consequences but these can be overcome by changes in project complexity, community participation, and return distribution. Moreover, the evidence suggests that better design matters even more for communities with poorer attributes. The use of community fixed effects and instrumental variables offers a significant improvement in empirical identification over previous studies. These results provide evidence that appropriate design can enable projects to succeed even in “bad” communities.

Andrabi, Tahir, Jishnu Das, Asim Ijaz Khwaja, Tara Vishwanath, and Tristan Zajonc. 2009. “Learning and Educational Achievements in Punjab Schools (LEAPS): Insights to inform the education policy debate,” 1-199. Publisher's VersionAbstract

There have been dramatic changes in the educational landscape of Pakistan in the new millennium. Enrollments are starting to look up with a one percentage point jump in net enrollments between 2001 and 2005. In addition, secular, co-educational and for-profit private schools have become a widespread presence in both urban and rural areas. Between 2000 and 2005, the number of private schools increased from 32,000 to 47,000 and by the end of 2005, one in every three enrolled children at the primary level was studying in a private school.

Khwaja, Asim, Tahir Andrabi, Jishnu Das, and Tristan Zajonc. 2008. “Madrassa Metrics: The Statistics and Rhetoric of Religious Enrollment in Pakistan.” Beyond Crisis: A Critical Second Look at Pakistan, Ed. Naveeda Khan, Routledge, May 2008.Abstract

Although consensus on deep determinants of terrorism still eludes us, Islamic religious schools are widely cited as an important contributor to extremism. Nowhere have these statements been more strongly applied than to Pakistan, where religious schools -- commonly known as madrassas -- were responsible for educating the leadership of the Taliban during the 1980s. In recent years, these schools have been called “factories of jihad” and are commonly believed to churn out extremists by the millions. While discussions about Pakistani madrassas are deemed central to the war on terror, two distinct issues remain difficult to resolve: First, do madrassas, through their teaching and training, create terrorists by indoctrinating their students in a particular world-view? Second, are parents increasingly sending the vast majority of their children to madrassas?

Khwaja, Asim, and Atif Mian. 2008. “Tracing the Impact of Bank Liquidity Shocks: Evidence from an Emerging Market.” American Economic Review 98 (4): 1413-1442. Publisher's VersionAbstract

We examine the impact of liquidity shocks by exploiting cross-bank liquidity variation induced by unanticipated nuclear tests in Pakistan. We show that for the same firm borrowing from two different banks, its loan from the bank experiencing a 1 percent larger decline in liquidity drops by an additional 0.6 percent. While banks pass their liquidity shocks on to firms, large firms—particularly those with strong business or political ties—completely compensate this loss by additional borrowing through the credit market. Small firms are unable to do so and face large drops in overall borrowing and increased financial distress.

Andrabi, Tahir, Jishnu Das, and Asim Ijaz Khwaja. 2008. “A Dime a Day: The Possibilities and Limits of Private Schooling in Pakistan.” Comparative Education Review 52 (3): 329-355. Publisher's Version comparative_education_review_vol_52_no_3_khwaja_2008_-_hks.pdf
Khwaja, Asim, Ali Cheema, and Adnan Qadir. 2006. “Local Government Reforms in Pakistan: Context, Content and Causes.” Decentralization and Local Governance in Developing Countries: A Comparative Perspective. Eds. D. Mookherjee and P. Bardhan, Cambridge, MA: MIT Press, July 2006.Abstract

This paper examines the recent decentralization reforms in Pakistan under General Musharraf. We highlight major aspects of this reform and analyze its evolution in a historical context to better understand potential causes behind this current decentralization. Analyzing the evolution of local government reforms in Pakistan is interesting because each of the three major reform experiments has been instituted at the behest of a non-representative centre using a ‘top down’ approach. Each of these reform experiments is a complementary change to a wider constitutional reengineering strategy devised to further centralization of political power in the hands of the non-representative centre. We argue that the design of the local government reforms in these contexts becomes endogenous to the centralization objectives of the non-representative centre. It is hoped that analyzing the Pakistani experience will help shed light on the positive political economy question of why non-representative regimes have been willing proponents of decentralization to the local level.

Khwaja, Asim, Tahir Andrabi, Jishnu Das, and Tristan Zajonc. 2006. “Religious School Enrollment in Pakistan: A Look at the Data.” Comparative Education Review (August 2006) 50 (3): 446-477. Publisher's VersionAbstract

In recent years, policy makers have expressed growing concern about Pakistan’s religious schools, which are commonly known as madrasas.1 These concerns have been fueled considerably by reports and articles in the popular press contending that madrasa enrollment is high and increasing. The “rise” is generally attributed to either an increasing preference for religious schooling among families or a lack of other viable schooling options for the household.2 Yet while these theories have widespread currency, none of the reports and articles that we have reviewed have based their analysis on publicly available data sources or established statistical methodologies. Given the importance that is placed on the subject by policy makers in Pakistan and internationally, it is troubling that these theories remain unconfirmed.