Publications by Type: Journal Article

Olken, Benjamin A, and Rohini Pande. 2011. “Corruption in Developing Countries.” Annual Review of Economics 4: 479-509. Publisher's VersionAbstract

Recent years have seen a remarkable expansion in economists’ ability to measure corruption. This, in turn, has led to a new generation of well-identified, microeconomic studies. We review the evidence on corruption in developing countries in light of these recent advances, focusing on three questions: how much corruption is there, what are the efficiency consequences of corruption, and what determines the level of corruption. We find robust evidence that corruption responds to standard economic incentive theory, but also that effects of anti-corruption policies often attenuate as officials find alternate strategies to pursue rents.

Singhal, Monica, Katherine Baicker, and Jeffery Clemens. 2011. “The Rise of the States: U.S. Fiscal Decentralization in the Postwar Period.” Journal of Public Economics 96 (11-12): 1079-1091. Publisher's VersionAbstract

One of the most dramatic changes in the fiscal federalism landscape during the postwar period has been the rapid growth in state budgets, which almost tripled as a share of GDP and doubled as a share of government spending between 1952 and 2006. We argue that the greater role of states cannot be easily explained by changes in Tiebout forces of fiscal competition, such as mobility and voting patterns, and are not accounted for by demographic or income trends. Rather, we demonstrate that much of the growth in state budgets has been driven by changes in intergovernmental interactions. Restricted federal grants to states have increased, and federal policy and legal constraints have also mandated or heavily incentivized state own-source spending, particularly in the areas of education, health and public welfare. These outside pressures moderate the forces of fiscal competition and must be taken into account when assessing the implications of observed revenue and spending patterns.

Hanna, Rema. 2010. “U.S. Environmental Regulation and FDI: Evidence from a Panel of US-Based Multinational Firms.” American Economic Journal: Applied Economics 2 (3): 158-189. Publisher's VersionAbstract

This paper measures the response of US-based multinationals to the Clean Air Act Amendments (CAAA). Using a panel of firm-level data over the period 1966 – 1999, I estimate the effect of regulation on a multinational’s foreign production decisions. The CAAA induced substantial variation in the degree of regulation faced by firms, allowing for the estimation of econometric models that control for firm-specific characteristics and industrial trends. I find that the CAAA caused regulated multinational firms to increase their foreign assets by 5.3 percent and their foreign output by 9 percent. Heavily regulated firms did not disproportionately increase foreign investment in developing countries.

Levy, Dan, and Jim Ohls. 2010. “Evaluation of Jamaica's PATH conditional cash transfer programme.” Journal of Development Effectiveness 2 (4): 421-441. Publisher's VersionAbstract

This paper summarises the findings of an evaluation of the Programme of Advancement through Health and Education (PATH), a conditional cash transfer programme implemented by the Government of Jamaica. The authors find that PATH was generally implemented as intended; exhibited better targeting to the poor than other similar social assistance programmes in Jamaica; and had positive and statistically significant impacts on school attendance and number of preventive healthcare visits for children. They find no evidence, however, that PATH was able to affect longer-term outcomes such as marks, grade progression, or healthcare status.

Chandra, Amitabh, Jonathan Gruber, and Robin McKnight. 2010. “Patient Cost Sharing in Low Income Populations.” American Economic Review 100 (2): 303-308. Publisher's VersionAbstract

Economic theory suggests that a natural tool to control medical costs is increased consumer cost sharing for medical care. While such cost sharing reduces “full insurance” (wherein patients are indifferent between falling sick or remaining healthy), a greater reliance on coinsurance and copayments can, in theory, stem patient and provider incentives to engage in moral hazard. These issues are particularly salient for low income populations who are at the center of current efforts to expand coverage (among the uninsured in 2008, 38 percent had incomes below the federal poverty line (FPL), and 52 percent had incomes between 100 and 299 percent of the FPL (Kaiser Commission on Medicaid and the Uninsured 2009)). As insurance is expanded to these groups, it is important to understand how they respond to greater levels of patient cost sharing. On the one hand, smarter plan design could help reduce the fiscal pressures associated with insurance expansion. But on the other, it is also possible that low income recipients are unable to cut back on utilization wisely and, consequently, experience hospitalization “offsets” as a result of greater levels of patient cost sharing. In particular, there remains a concern among many that higher cost sharing on primary care will lead to less effective use of primary care, worse health, and, consequently, higher downstream costs at hospitals (the so-called “offset effects”).

Hanna, Rema, and Paulina Olivia. 2010. “The Impact of Inspections on Plant-Level Air Emissions.” The B.E. Journal of Economic Analysis & Policy 10 (1): 1-33. Publisher's VersionAbstract

Each year, the United States conducts approximately 20,000 inspections of manufacturing plants under the Clean Air Act. This paper compiles a panel dataset on plant-level inspections, fines, and emissions to understand whether these inspections actually reduce air emissions. We find plants reduce air emissions by fifteen percent, on average, following an inspection under the Clean Air Act. Plants that belong to industries that typically have low abatement costs respond more strongly to an inspection than those who belong to industries with high abatement costs.

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.

Hanna, Rema, Marianne Bertrand, and Sendhil Mullainathan. 2010. “Affirmative action in education: Evidence from engineering college admissions in India.” Journal of Public Economics 94 (1-2): 16-29. Publisher's VersionAbstract

This paper examines an affirmative action program for “lower-caste” groups in engineering colleges in India. We study both the targeting properties of the program, and its implications for labor market outcomes. We find that affirmative action successfully targets the financially disadvantaged: the upper-caste applicants that are displaced by affirmative action come from a richer economic background than the lower-caste applicants that are displacing them. Targeting by caste, however, may lead to the exclusion of other disadvantaged groups. For example, caste-based targeting reduces the overall number of females entering engineering colleges. We find that despite poor entrance exam scores, lower-caste entrants obtain a positive return to admission. Our estimates, however, also suggest that these gains may come at an absolute cost because the income losses experienced by displaced upper-caste applicants are larger than the income gains experienced by displacing lower-caste students. Limited sample sizes in our preferred econometric specifications, however, prevent us from drawing strong conclusions from these labor market findings.

Field, Erica, Seema Jayachandran, and Rohini Pande. 2010. “Do Traditional Institutions Constrain Female Entrepreneurship? A Field Experiment on Business Training in India.” American Economic Review 100 (2): 125-129. Publisher's Version
Cutler, David, Winnie Fung, Michael Kremer, Monica Singhal, and Tom Vogl. 2010. “Early-life Malaria Exposure and Adult Outcomes: Evidence from Malaria Eradication in India.” American Economic Journal: Applied Economics 2 (2): 72-94. Publisher's VersionAbstract

We examine the effects of exposure to malaria in early childhood on educational attainment and economic status in adulthood by exploiting geographic variation in malaria prevalence in India prior to a nationwide eradication program in the 1950s. We find that the program led to modest increases in household per capita consumption for prime age men, and the effects for men are larger than those for women in most specifications. We find no evidence of increased educational attainment for men and mixed evidence for women.

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.

Pande, Rohini, Lori Beaman, Raghabendra Chattopadhyay, Esther Duflo, and Petia Topalova. 2009. “Powerful Women: Does Exposure Reduce Bias?.” Quarterly Journal of Economics 124 (4): 1497-1540. Publisher's VersionAbstract

We exploit random assignment of gender quotas for leadership positions on Indian village councils to show that prior exposure to a female leader is associated with electoral gains for women. After ten years of quotas, women are more likely to stand for, and win, elected positions in councils required to have a female chief councilor in the previous two elections. We provide experimental and survey evidence on one channel of influence—changes in voter attitudes. Prior exposure to a female chief councilor improves perceptions of female leader effectiveness and weakens stereotypes about gender roles in the public and domestic spheres.

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.

Svensson, Jakob, and David Yanagizawa-Drott. 2009. “Getting Prices Right: The Impact of the Market Information Service in Uganda.” Journal of the European Economic Association 7 (2-3): 435-445. Publisher's VersionAbstract

The Market Information Service project in Uganda collected data on prices for the main agricultural commodities in major market centers and disseminated the information through local FM radio stations in various districts. Exploiting the variation across space between households with and without access to a radio, we find evidence suggesting that better-informed farmers managed to bargain for higher farm-gate prices on their surplus production.

Yanagizawa-Drott, David, and Nancy Qian. 2009. “The Strategic Determinants of U.S. Human Rights Reporting: Evidence from the Cold War.” Journal of the European Economic Association 7 (2-3): 446-457. Publisher's VersionAbstract

This paper uses a country-level panel dataset to test the hypothesis that the United States biases its human rights reports of countries based on the latters’ strategic value. We use the difference between the U.S. State Department’s and Amnesty International’s reports as a measure of U.S. "bias". For plausibly exogenous variation in strategic value to the U.S., we compare this bias between U.S. Cold War (CW) allies to non-CW allies, before and after the CW ended. The results show that allying with the U.S. during the CW significantly improves reports on a country’s human rights situation from the U.S. State Department relative to Amnesty International.

Ahlerup, Pelle, Ola Olsson, and David Yanagizawa-Drott. 2009. “Social Capital vs Institutions in the Growth Process.” European Journal of Political Economy 25 (1): 1-14. Publisher's VersionAbstract

Is social capital a substitute or a complement to formal institutions for achieving economic growth? A number of recent micro studies suggest that interpersonal trust has its greatest impact on economic performance when court institutions are relatively weak. The conventional wisdom from most macro studies, however, is that social capital is unconditionally good for growth. On the basis of the micro evidence, we outline an investment game between a producer and a lender in an incomplete-contracts setting. A key insight is that social capital will have the greatest effect on the total surplus from the game at lower levels of institutional strength and that the effect of social capital vanishes when institutions are very strong. When we bring this prediction to an empirical cross-country growth regression, it is shown that the marginal effect of social capital (in the form of interpersonal trust) decreases with institutional strength. Our results imply that a one standard deviation rise in social capital in weakly institutionalized Nigeria should increase economic growth by 1.8 percentage points, whereas the same increase in social capital only increases growth by 0.3 percentage points in strongly institutionalized Canada.

Blair, Randall, Larissa Campuzano, Dan Levy, and Lorenzo Moreno. 2009. “Toward closing the evaluation gap: lessons from three recent impact evaluations of social programs in Latin America and the Caribbean.” Well Being and Social Policy 5 (2): 1-23. Publisher's VersionAbstract

Despite recent growing demand from funders and governments, rigorous impact evaluations in Latin America and the Caribbean remain the exception rather than the rule. Many commissioned impact evaluations are methodologically weak, and thus only marginally useful in assessing the impact of social interventions. Other impact evaluations feature strong research methodologies at their conception, but face considerable institutional challenges during key points in the design and implementation phases. This paper identifies some of the barriers that limit the design and implementation of rigorous impact evaluations in this region, as well as several enablers to the successful design and implementation of such evaluations. The paper also outlines some key practices for designing and implementing high-quality impact evaluations in Latin America and the Caribbean. We use a case study methodology that combines our experience designing and implementing impact evaluations in three ongoing or recent social programs in El Salvador, Jamaica, and Mexico.

Pande, Rohini, and Erica Field. 2008. “Repayment Frequency and Default in Microfinance: Evidence from India.” Journal of European Economic Association, April-May 2008 6 (2-3): 501-509. Publisher's VersionAbstract

In stark contrast to bank debt contracts, most micro-finance contracts require that repayments start nearly immediately after loan disbursement and occur weekly thereafter. Even though economic theory suggests that a more flexible repayment schedule would benefit clients and potentially improve their repayment capacity, micro-finance practitioners argue that the fiscal discipline imposed by frequent repayment is critical to preventing loan default. In this paper we use data from a field experiment which randomized client assignment to a weekly or monthly repayment schedule and find no significant effect of type of repayment schedule on client delinquency or default. Our findings suggest that, among micro-finance clients who are willing to borrow at either weekly or monthly repayment schedules, a more flexible schedule can significantly lower transaction costs without increasing client default.

Singhal, Monica. 2008. “Special Interest Groups and the Allocation of Public Funds.” Journal of Public Economics 92 (3-4): 548-564. Publisher's Version
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.