Publications by Year: 2011

Pande, Rohini, Abhijit V. Banerjee, Selvan Kumar, and Felix Su. 2011. “Do Informed Voters Make Better Choices? Experimental Evidence from Urban India”.Abstract

In the run-up to elections in a large Indian city, residents in a random sample of slums received newspapers containing report cards on politicians. The report card for a jurisdiction presented information, obtained under India’s disclosure laws, on the performance of the incumbent legislator and the qualifications of the incumbent and two main challengers. Relative to the control slums, treatment slums saw higher turnout, reduced vote buying, and higher vote share for better performing incumbents and relatively more qualified incumbents. Moreover, voters demonstrated sophistication in how they use report card information to judge performance and qualifications – they used their knowledge on the incidence of public good spending in slums to evaluate jurisdiction-level information on public good spending by the incumbent, and used challenger qualifications as a yardstick to judge incumbent qualifications.

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.

Callen, Michael, and Ali Hasanain. 2011. “The Punjab Model of Proactive Governance: Empowering Citizens through Information Communication Technology - Findings from an Early Review of Evidence.” Punjab Model of Proactive Governance.Abstract

The Punjab Model represents the novel application of Information Communications Technology (ICT) to engage citizens and to close the space for extortion in the delivery of public services. The program has three objectives. First, the program seeks to deter corruption by monitoring petty officials through large-scale solicitation of service beneficiary feedback. Second, it seeks to promote direct citizen engagement and thereby signal commitment to service provision on the part of the government. Last, it seeks to improve services by allowing citizens to report problems.

Callen, Michael, Eli Berman, Joseph H Felter, and Jacob N Shapiro. 2011. “Do Working Men Rebel: Insurgency and Unemployment in Afghanistan, Iraq, and the Philippines.” Journal of Conflict Resolution 55 (4): 496-528. Publisher's VersionAbstract

Most aid spending by governments seeking to rebuild social and political order is based on an opportunity-cost theory of distracting potential recruits. The logic is that gainfully employed young men are less likely to participate in political violence, implying a positive correlation between unemployment and violence in locations with active insurgencies. The authors test that prediction in Afghanistan, Iraq, and the Philippines, using survey data on unemployment and two newly available measures of insurgency: (1) attacks against government and allied forces and (2) violence that kill civilians. Contrary to the opportunity-cost theory, the data emphatically reject a positive correlation between unemployment and attacks against government and allied forces (p< .05 percent). There is no significant relationship between unemployment and the rate of insurgent attacks that kill civilians. The authors identify several potential explanations, introducing the notion of insurgent precision to adjudicate between the possibilities that predation on one hand, and security measures and information costs on the other, account for the negative correlation between unemployment and violence in these three conflicts.

Levy, Dan, Anca Dumitrescu, and Matt Sloan. 2011. “Impact evaluation of Niger's IMAGINE program.” Mathematica Policy Research, 1-104. Publisher's VersionAbstract

The IMAGINE program was designed to improve educational outcomes of girls in Niger. IMAGINE was funded by the Millennium Challenge Corporation (MCC) and was a component of the three-year Threshold Program in Niger (NTP) dedicated to reducing corruption, registering more businesses, promoting land titling, and increasing girls’ school enrollment, attendance, and completion rates. In December 2009, MCC suspended the NTP in the midst of implementation due to undemocratic actions undertaken by the government. While most of the NTP components were not sufficiently implemented to allow for a rigorous evaluation of their intended impacts, the girls’ education project had been substantially implemented by that time and is thus the focus of our evaluation.

The girls’ education program, locally known as IMAGINE, was implemented in 10 departments in Niger with low girls’ enrollment and primary school completion rates. Plan International, a nongovernmental organization, was responsible for implementing IMAGINE under the supervision of USAID, during 2008–2010.  The program consisted of constructing 68 primary schools and implementing a set of complementary interventions designed to increase girls’ enrollment and completion rates. The schools were based on a prototype that included three classrooms, housing for three female teachers, a preschool, and separate latrines for boys and girls equipped with hand- washing stations. Schools were deliberately located near a water source and a well was installed close by. The complementary interventions included designing and disseminating training modules for teachers, promoting extracurricular activities, providing teacher incentive awards, and conducting a mobilization campaign in support of girls’ education. Due to the suspension of the NTP, the IMAGINE program was only partially implemented. Sixty-two functional schools were constructed, but the majority of the complementary activities were not implemented.

This report documents the main findings from the impact evaluation of the IMAGINE program. Overall, IMAGINE had a 4.3 percentage point positive impact on primary school enrollment, no impact on attendance, and no impact on math and French test scores. The program impacts were generally larger for girls than for boy . For girls, the program had an 8 percentage point positive impact on enrollment and a 5.4 per centage point impact on attendance. The program had no impact on girls’ math scores, though there is suggestive evidence it may have had a positive impact of 0.09 standard deviations on girls’ French test scores. No significant impacts were detected for boys’ enrollment, attendance, or test scores. Finally, impacts were larger for younger children (ages 7-10), than for those between the ages of 10 and 12.

Chandra, Amitabh, Anupam B Jena, and Jonathan S Skinner. 2011. “The pragmatist's guide to comparative effectiveness research.” Journal of Economic Perspectives 25 (2): 27-46. Publisher's VersionAbstract

All developed countries have been struggling with a trend toward health care absorbing an ever-larger fraction of government and private budgets. Adopting any treatment that improves health outcomes, no matter what the cost, can worsen allocative inefficiency by paying dearly for small health gains. One potential solution is to rely more heavily on studies of the costs and effectiveness of new technologies in an effort to ensure that new spending is justified by a commensurate gain in consumer benefits. But not everyone is a fan of such studies and we discuss the merits of comparative effectiveness studies and its cousin, cost-effectiveness analysis. We argue that effectiveness research can generate some moderating effects on cost growth in healthcare if such research can be used to nudge patients away from less-effective therapies, whether through improved decision making or by encouraging beefed-up copayments for cost-ineffective procedures. More promising still for reducing growth is the use of a cost-effectiveness framework to better understand where the real savings lie—and the real savings may well lie in figuring out the complex interaction and fragmentation of healthcare systems.

Chandra, Amitabh, Jonathan Gruber, and Robin McKnight. 2011. “Patient Cost-Sharing and Hospitalization Offsets in the Elderly.” American Economic Review 100 (1): 193-213. Publisher's VersionAbstract

In the Medicare program, increases in cost sharing by a supplemental insurer can exert financial externalities. We study a policy change that raised patient cost sharing for the supplemental insurer for retired public employees in California. We find that physician visits and prescription drug usage have elasticities that are similar to those of the RAND Health Insurance Experiment (HIE). Unlike the HIE, however, we find substantial “offset” effects in terms of increased hospital utilization. The savings from increased cost sharing accrue mostly to the supplemental insurer, while the costs of increased hospitalization accrue mostly to Medicare.

Singhal, Monica, and Benjamin A Olken. 2011. “Informal taxation.” American Economic Journal: Applied Economics 3 (4): 1-28. Publisher's VersionAbstract

Informal payments are a frequently overlooked source of local public finance in developing countries. We use microdata from ten countries to establish stylized facts on the magnitude, form, and distributional implications of this "informal taxation." Informal taxation is widespread, particularly in rural areas, with substantial in-kind labor payments. The wealthy pay more, but pay less in percentage terms, and informal taxes are more regressive than formal taxes. Failing to include informal taxation underestimates household tax burdens and revenue decentralization in developing countries. We discuss various explanations for and implications of these observed stylized facts.

Singhal, Monica, and Erzo FP Luttmer. 2011. “Culture, Context, and the Taste for Redistribution.” American Economic Journal: Economic Policy 3 (1): 157-179. Publisher's VersionAbstract

Is culture an important determinant of preferences for redistribution? To separate culture from the economic and institutional environment ("context"), we relate immigrants' redistributive preferences to the average preference in their birth countries. We find a strong positive relationship that is robust to rich controls for economic factors and cannot easily be explained by selective migration. This effect is as large as that of own household income and appears stronger for those less assimilated into the destination country. Immigrants from high-preference countries are more likely to vote for more pro-redistribution parties. The effect of culture persists strongly into the second generation.

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.

Hanna, Rema, and Michael Greenstone. 2011. “Environmental Regulations, Air and Water Pollution, and Infant Mortality in India”.Abstract

Using the most comprehensive data file ever compiled on air pollution, water pollution, environmental regulations, and infant mortality from a developing country, the paper examines the effectiveness of India’s environmental regulations. The air pollution regulations were effective at reducing ambient concentrations of particulate matter, sulfur dioxide, and nitrogen dioxide. The most successful air pollution regulation is associated with a modest and statistically insignificant decline in infant mortality. However, the water pollution regulations had no observable effect. Overall, these results contradict the conventional wisdom that environmental quality is a deterministic function of income and underscore the role of institutions and politics.

Pande, Rohini, Michael Greenstone, Aparna Krishnan, Nicholas Ryan, and Anant Sudarshan. 2011. “Improving Human Health through a Market Friendly Emissions Scheme.” Seminar Volume for International Seminar on Global Environment and Disaster Management: Law and Society Supreme Court of India, Ministry of Environment and Forest and Law Ministry). Publisher's Version
Pande, Rohini. 2011. “Can Informed Voters Enforce Better Governance? Experiments in Low Income Democracies.” Annual Review of Economics 3 (1): 215-237. Publisher's VersionAbstract

This article evaluates a body of recent work which uses field and natural experiments to answer this question. A common finding in the literature is that voter behavior is malleable and that in-formation about the political process and politician performance improves electoral accountability. Limited availability of information thus provides one explanation for the persistence of low quality politicians and the existence of identity politics and electoral malpractices in low-income democracies. Understanding how voters can gain access to credible sources of information and how politicians react to improved information about their performance are promising avenues for future research

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.

Chandra, Amitabh, and Jonathan S Skinner. 2011. “Technology growth and expenditure growth in health care”. Publisher's VersionAbstract

In the United States, health care technology has contributed to rising survival rates, yet health care spending relative to GDP has also grown more rapidly than in any other country. We develop a model of patient demand and supplier behavior to explain these parallel trends in technology growth and cost growth. We show that health care productivity depends on the heterogeneity of treatment effects across patients, the shape of the health production function, and the cost structure of procedures such as MRIs with high fixed costs and low marginal costs. The model implies a typology of medical technology productivity: (I) highly cost-effective “home run” innovations with little chance of overuse, such as anti-retroviral therapy for HIV, (II) treatments highly effective for some but not for all (e.g. stents), and (III) “gray area” treatments with uncertain clinical value such as ICU days among chronically ill patients. Not surprisingly, countries adopting Category I and effective Category II treatments gain the greatest health improvements, while countries adopting ineffective Category II and Category III treatments experience the most rapid cost growth. Ultimately, economic and political resistance in the U.S. to ever-rising tax rates will likely slow cost growth, with uncertain effects on technology growth.

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.

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.