Asim Ijaz Khwaja

Khwaja, Asim, Tahir Andrabi, Natalie Bau, and Jishnu Das. Submitted. “Are Bad Public Schools "Public Bads"? Test Scores and Civic Values in Public and Private Schools”.Abstract

Enrollments in private schools have exploded in many low income countries during the last decade and now exceed 20 percent of primary enrollments in countries like India and Pakistan. The majority of these schools are small scale, low cost enterprises that effectively do not face any regulatory oversight or receive any government subsidies. This key feature offers a unique opportunity to evaluate the outcomes benefits (or lack thereof), not of vouchers or public support, but of a pure market model of educational provision. We combine data on household and school locations with test scores from Pakistan to provide instrumental variables estimates of public private differences in test scores and civic values. Since tests were administered by the research team in strictly controlled conditions, we are able to rule out the possibility of cheating. Our instrumental variables estimates show that test scores of children in private schools are standard deviation higher (depending on the subject) than those of their public school counterparts. Furthermore, and surprisingly, children in private schools also have better civic skills; they are better informed about Pakistan, more "pro-democratic and exhibit lower gender biases. Finally, the cost of educating a child in a private school is 40 percent lower than in a government school without factoring in administrative costs. This cost saving is equivalent to 5 percent of total village consumption expenditures in the sample. Adding in administrative costs could inflate the cost difference 2 times or more. These results argue for a reassessment of the fundamental model of education delivery in low income settings, where governance and accountability problems in public schools are common

Khwaja, Asim, Rajkamal Iyer, Erzo F.P. Luttmer, and Kelly Shue. 2016. “Screening Peers Softly: Inferring the Quality of Small Borrowers.” Management Science 62 (6): 1554-1577. Publisher's Version screening_peers_softly_khwaja.pdf
Khwaja, Asim, Tahir Andrabi, and Jishnu Das. 2016. “Delivering Education: A Pragmatic Framework for Improving Education in Low-Income Countries.” Handbook of International Education.Abstract

Even as primary school enrollments have increased in most low income countries levels of learning remain low and highly unequal. Responding to greater parental demand for quality, low cost private schools have emerged as one of the fastest growing schooling options, challenging the monopoly of state provided education and broadening the set of educational providers. Historically, the rise of private schooling is always deeply intertwined with debates around who chooses what schooling is about and who represents the interests of children. We believe that this time is no different. But rather than first resolve the question of how child welfare is to be adjudicated, we argue instead for a `pragmatic framework’. In our pragmatic framework, policy takes into account the full schooling environment which includes public, private and other types of providers and is actively concerned with first alleviating constraints that prohibit parents and schools from fulfilling their own stated objectives. Using policy actionable experiments as examples, we show that the pragmatic approach can lead to better schooling for children: Alleviating constraints by providing better information, better access to finance or greater access to skilled teachers brings in more children into school and increases test scores in language and Mathematics. These areas of improvement are very similar to those where there is already abroad societal consensus that improvement is required.

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
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.

Iyer, Rajkamal, Asim Ijaz Khwaja, Erzo F.P. 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

Khwaja, Asim, Bailey Klinge, and Carlos del Carpio. 2013. Enterprising Psychometrics and Poverty Reduction. Springer Brief Series: Innovative Psychology for Poverty Reduction. Eds. Sharon Panulla & Stuard C. Carr. New York: Springer, May 17, 2013. Publisher's VersionAbstract

There is a huge lost opportunity in emerging markets. Between 310 and 380 million of small business owners want loans, and could earn very high rates of return on that additional capital if they could get it. Banks have this capital available, and want to let it out, particularly to small businesses since competition in that segment is low, unmet demand is high, and the interest rates that can be paid are very attractive. But the connection between the banks and entrepreneurs just isn't happening, because it is extremely difficult for banks to evaluate risk and know who to lend to. The entrepreneurs running these small businesses typically lack credit history and collateral. They don't have well-fomatted trustable financial statements, and many of their transactions are with cash. So banks have no means to identify the high-potential, honest entrepreneurs. Lending to small businesses in advanced economies suffered this same problem, until the banks started evaluating and serving small business more like they serve the mass individual segment rather than treating them as mini-corporations. One of the key innovations was to use individual borrowing history of the owner to evaluate risk for the small business loan, applying quantitative credit scoring. This approach lead to a rapid expansion in profitable and sustainable small business lending, because it leveraged what information was available, and did it in a way that kept transaction costs low so that banks could make a large number of smaller loans to businesses. But what can be done in emerging markets, where credit bureaus lack the depth and breadth of coverage?

Khwaja, Asim Ijaz, Tahir Andrabi, and Jishnu Das. 2012. “Students Today, Teachers Tomorrow: Identifying Constraints on the Provision of Education.” Journal of Public Economics 100 (1): 1-14. Publisher's VersionAbstract

With an estimated one hundred and fifteen million children not attending primary school in the developing world, increasing access to education is critical. This pap er highlights a supply-side factor - the availability of low-cost teachers - and the resulting ability of the market to affordable education. We first show that private schools are three times more likely to emerge in villages with government girls' secondary schools (GSSs). Identication is obtained by using official school construction guidelines as an instrument for the presence of GSSs. In contrast, private school presence shows little or no relationship with girls' primary or boys' primary and secondary government schools. In support of a supply-channel, we then show that, villages which received a GSS have over twice as many educated women, and private school teachers' wages are 27 percent lower in these villages. In an environment with low female education and mobility, GSSs substantially increase the lo cal supply of skilled women lowering wages locally and allowing the market to oer affordable education. These findings highlight the prominent role of women as teachers in facilitating educational access and resonate with similar historical evidence from develop ed economies. The students of to day are the teachers of tomorrow

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.

Khwaja, Asim Ijaz, and Atif Mian. 2011. “Rent Seeking and Corruption in Financial Markets.” Annual Review of Economics 3 (1): 579-600. Publisher's VersionAbstract

We describe recent advances in the study of rent seeking and corruption in financial markets. We outline three areas of inquiry: (a) conceptualizing rent seeking, (b) identifying rent-provision channels and their general equilibrium impact, and (c) designing feasible remedial mechanisms. We provide suggestions for making further progress in these areas and review a variety of approaches taken in the recent literature.

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.

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.

Kwaja, Asim, David Clingingsmith, and Michael Kremer. 2009. “Estimating the Impact of the Hajj: Religion and Tolerance In Islam's Global Gathering.” Quarterly Journal of Economics, August, 2009 124 (3): 1133-1170. Publisher's VersionAbstract

We estimate the impact on pilgrims of performing the Hajj pilgrimage to Mecca. Our method compares successful and unsuccessful applicants in a lottery used by Pakistan to allocate Hajj visas. Pilgrim accounts stress that the Hajj leads to a feeling of unity with fellow Muslims, but outsiders have sometimes feared that this could be accompanied by antipathy toward non-Muslims. We find that participation in the Hajj increases observance of global Islamic practices such as prayer and fasting while decreasing participation in localized practices and beliefs such as the use of amulets and dowry. It increases belief in equality and harmony among ethnic groups and Islamic sects and leads to more favorable attitudes toward women, including greater acceptance of female education and employment. Increased unity within the Islamic world is not accompanied by antipathy toward non-Muslims. Instead, Hajjis show increased belief in peace, and in equality and harmony among adherents of different religions. The evidence suggests that these changes are more a result of exposure to and interaction with Hajjis from around the world, rather than religious instruction or a changed social role of pilgrims upon return.

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, PRASHANT BHARADWAJ, and Atif Mian. 2009. “The Partition of India: Demographic Consequences.” International Migration, June 2009.Abstract

Large scale migrations, especially involuntary ones, can have a sudden and substantial impact on the demographics of both sending and receiving communities. The partition of the Indian subcontinent in 1947 resulted in one of the largest and most rapid population exchanges in human history. We compile census data to estimate its impact on a district’s educational, occupational, and gender composition. Comparing neighboring districts within a state better isolates the effect of the migratory flows from secular changes. We find large effects within four years. With migrants typically more educated than non-migrants, inflows into a district raised its literacy levels (by 12-16% more than less affected districts in India and Pakistan) while outflows reduced it (by 20% in Pakistan). The effects are asymmetric across regions. With relatively less land vacated by those who left Indian Punjab, Indian districts with large inflows saw a decline of 70% in the growth of agricultural occupations. In contrast, Indian districts with large outflows saw an increase of 56% in the growth of the fraction of agriculturists. Initial differences in migrant characteristics also meant there were large net effects even when a district saw similar two-way flows. Along the gender dimension, Indian districts with large outflows saw a greater increase in gender balance (the percentage of males fell); the corresponding inflows into Pakistani districts also improved the gender balance. While Pakistani in-migrants had higher male ratios relative to the communities they left, these ratios were lower compared to the communities they migrated to. Given the partition was along religious lines - with Muslims leaving India and Hindus and Sikhs leaving what became Pakistan and Bangladesh – it increased religious homogenization within communities. However, our results suggest that this  was accompanied by increased educational and occupational differences within religious groups. We hypothesize that these compositional effects, in addition to an aggregate population impact, are likely features of involuntary migrations and, as in the case of India, Pakistan, and Bangladesh, can have important long-term consequence.

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.

2008. “The Big March: Migratory Flows after the Partition of India.” Economic and Political Weekly, August 30, 2008, 39-49. Publisher's VersionAbstract

The Partition of India in 1947 along ostensibly religious lines into India, Pakistan, and what eventually became Bangladesh resulted in one of the largest and most rapid migrations in human history. In this paper district level census data from archives are compiled to quantify the scale of migratory flows across the subcontinent.We estimate total migrator y inf lows of 14.5 million and outflows of 17.9 million, implying 3.4 million “missing” people. The paper also uncovers a substantial degree of regional variability. Flows were much larger along the western border, higher in cities and areas close to the border, and dependent heavily on the size of the “minority” religious group. The migratory flows also display a “relative replacement effect” with in-migrants moving to places that saw greater outmigration.