Publications by Year: 2012

2012
Pande, Rohini, and Benjamin Olken. 2012. “Corruption in Developing Countries.” Annual Review of Economics. 4 (1): 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.

Pande, Rohini, and Deanna Ford. 2012. “Gender Quotas and Female Leadership: A Review.” Background Paper for the World Development Report on Gender. April, 2011. Publisher's VersionAbstract

Despite significant advances in education and political participation, women remain underrepresented in leadership positions in politics and business across the globe. In many countries, policy-makers have responded by introducing gender quotas in politics and increasingly, many have expressed an interest in requiring gender quotas for corporate boards. This paper reviews the evidence on the equity and efficiency impacts of gender quotas for political positions and corporate board membership. Adoption of quotas by countries is likely correlated with attitudes about women within a country. However, the randomized allocation of political quotas in India and the unanticipated introduction of board quotas in Norway have allowed researchers to provide causal analysis and this review focuses on evidence from these two settings. The Indian evidence demonstrates that quotas increase female leadership and influences policy outcomes. In addition, rather than create a backlash against women, quotas can reduce gender discrimination in the long-term. The board quota evidence is more mixed. While female entry on boards is correlated with changing management practices, this change appears to adversely influence short-run profits. Whether this is partly driven by negative perceptions of female management choices remains an open question. Returning to the broader cross-country context, we find evidence in many different settings that political and corporate entities often act strategically to circumvent the intended impact of quotas. Consistent with this, we report suggestive evidence that the design of the quota and selection systems matter for increasing female leadership.

Pande, Rohini, Lori Beaman, and Alexandra Cirone. 2012. “Politics as a Male Domain and Empowerment in India.” Chapter 14 in The Impact of Gender Quotas: Women's Descriptive, Substantive, and Symbolic Representation. Ed. S. Franceschet, M. Kook, and J. Piscopo. Oxford University Press. Publisher's VersionAbstract

India is the world’s largest democracy, yet female presence in India’s state and national legislatures has consistently remained under 10 percent. In contrast, female representation in Iocal village councils has risen dramatically in the last twenty years. A constitutional amendment instituted in 1993 both devolved significant powers to village councils and instituted a quota system that required that one-third of village council leader positions be reserved for women. While the mandatory nature of the quota system implied that it led to an immediate increase in descriptive representation, our work with co-authors demonstrates that it also increased substantive representation.

Pande, Rohini, Timothy Besley, and Vijayendra Rao. 2012. “Just Rewards? Local Politics and Public Resource Allocation in South India.” World Economic Review 26 (2): 191-216. Publisher's VersionAbstract

What factors determine the nature of political opportunism in local government in South-India? To answer this question, we study two types of policy decision that have been delegated to local politicians {beneficiary selection for transfer programs and the allocation of within-village public goods. Our data on village councils in South-India show that, relative to other citizens, elected councillors are more likely to be selected as beneficiaries of a large transfer program. The chief councillor's village also obtains more public goods, relative to other villages.These findings can be interpreted using a simple model of the logic of political incentives in the context that we study.

pande_r_-_just_rewards_wber.pdf
Yanagizawa-Drott, David, and Jakob Svensson. 2012. “Estimating Impact in Partial vs. General Equilibrium: A Cautionary Tale from a Natural Experiment in Uganda”.Abstract

This paper provides an example where sensible conclusions made in partial equilibrium are offset by general equilibrium effects. We study the impact of an intervention that distributed information on urban market prices of food crops through rural radio stations in Uganda. Using a differences-in-differences approach and a partial equilibrium assumption of unaffected urban market prices, the conclusion is the intervention lead to a substantial increase in average crop revenue for farmers with access to the radio broadcasts, due to higher farm-gate prices and a higher share of output sold to traders. This result is consistent with a simple model of the agricultural market, where a small-scale policy intervention  effects the willingness to sell by reducing information frictions between farmers and rural-urban traders. However, as the radio broadcasts were received by millions of farmers, the intervention had an aggregate effect on urban market prices, thereby falsifying the partial equilibrium assumption and conclusion. Instead, and consistent with the model when the policy intervention is large-scale, market prices fell in response to the positive supply response by farmers with access to the broadcasts, while crop revenues for farmers without access decreased as they responded to the lower price level by decreasing market participation. When taking the general equilibrium effect on prices and farmers without access to the broadcasts into account, the conclusion is the intervention had no impact on average crop revenue, but large distributional consequences.

esitmating_impact_-_august_2012.pdf
Yanagizawa-Drott, David, and Andreas Madestam. 2012. “Shaping the Nation: The Effect of Fourth of July on Political Preferences and Behavior in the United States”.Abstract

This paper examines whether social interactions and cultural practices affect political views and behavior in society. We investigate the issue by documenting a major social and cultural event at different stages in life: the Fourth of July celebrations in the United States during the 20th century. Using absence of rainfall as a proxy for participation in the event, we find that days without rain on Fourth of July in childhood shift adult views and voting in favor of the Republicans and increase turnout in presidential elections. The effects we estimate are highly persistent throughout life and originate in early age. Rain-free Fourth of Julys experienced as an adult also make it more likely that people identify as Republicans, but the effect depreciates substantially after a few years. Taken together, the evidence suggests that political views and behavior derive from social and cultural experience in early childhood, and that Fourth of July shapes the political landscape in the Unites States.

shaping_the_nation_rwp12-034.pdf
Duflo, Esther, Rema Hanna, and Stephen P Ryan. 2012. “Incentives Work: Getting Teachers to Come to School.” American Economic Review 102 (4): 1241-1278. Publisher's VersionAbstract

We use a randomized experiment and a structural model to test whether monitoring and financial incentives can reduce teacher absence and increase learning in India. In treatment schools, teachers' attendance was monitored daily using cameras, and their salaries were made a nonlinear function of attendance. Teacher absenteeism in the treatment group fell by 21 percentage points relative to the control group, and the children's test scores increased by 0.17 standard deviations. We estimate a structural dynamic labor supply model and find that teachers respond strongly to financial incentives. Our model is used to compute cost-minimizing compensation policies.

incentives_work_aer.pdf
Banerjee, Abhijit, Rema Hanna, and Sendhil Mullainathan. 2012. “Corruption.” The Handbook of Organizational Economics. Princeton University Press, 1109-1147. 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, and Leigh L Linden. 2012. “Discrimination in grading.” American Economic Journal: Economic Policy 4 (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
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
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.

Duflo, Esther, Rema Hanna, and Stephen Ryan. 2012. “Incentives work: getting teachers to come to school.” American Economic Review 102 (4): 1241-1278. Publisher's VersionAbstract

We use a randomized experiment and a structural model to test whether monitoring and financial incentives can reduce teacher absence and increase learning in rural India. In treatment schools, teachers' attendance was monitored daily using cameras, and their salaries were made a nonlinear function of attendance. Absenteeism by teachers fell by 21 percentage points relative to the control group, and children's test scores increased by 0.17 standard deviations. We estimate a structural dynamic labor supply model and nd that teachers responded strongly to the nancial incentives, and that this alone can explain the dierence between the two groups. Our model is used to compute cost-minimizing compensation policies

american_economic_review_vol_102_no_4_hanna_2011_-_hks_incentives_work.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, 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, 387-414. 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.

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.

Alatas, Vivi, Abhijit Banerjee, Rema Hanna, Benjamin A. Olken, and Julia Tobias. 2012. “Targeting the Poor: Evidence from a Field Experiment in Indonesia.” American Economic Review 102 (4): 1206-1240. Publisher's VersionAbstract

This paper reports an experiment in 640 Indonesian villages on three approaches to target the poor: proxy-means tests (PMT), where assets are used to predict consumption; community targeting, where villagers rank everyone from richest to poorest; and a hybrid. Defining poverty based on PPP$2 per-capita consumption, community targeting and the hybrid perform somewhat worse in identifying the poor than PMT, though not by enough to significantly affect poverty outcomes for a typical program. Elite capture does not explain these results. Instead, communities appear to apply a different concept of poverty. Consistent with this finding, community targeting results in higher satisfaction.

american_economic_review_vol_102_no_4_hanna_2011_-_hks.pdf
Pande, Rohini, Lori Beaman, Esther Duflo, and Peptia Topalava. 2012. “Female Leadership Raises Aspirations and Educational Attainment for Girls: A Policy Experiment in India.” Science 335 (6068): 582-586. Publisher's VersionAbstract

Exploiting a randomized natural experiment in India, we show that female leadership influences adolescent girls’ career aspirations and educational attainment. A 1993 law reserved leadership positions for women in randomly selected village councils. Using 8,453 surveys of adolescents aged 11-15 and their parents in 495 villages, we find that, compared to villages that were never reserved, the gender gap in aspirations closed by 25% in parents and 32% in adolescents in villages assigned to a female leader for two election cycles. The gender gap in adolescent educational attainment is erased and girls spent less time on household chores. We find no evidence of changes in young women’s labor market opportunities, suggesting that the impact of women leaders primarily reflects a role model effect.

science_vol_335_no_6068_pande_2012.pdf
Pande, Rohini, Erica Field, John Papp, and Jeanette Park. 2012. “Repayment Flexibility Can Reduce Financial Stress: A Randomized Control Trial with Microfinance clients in India.” PLoS One 7 (9): 1-7. Publisher's VersionAbstract

Financial stress is widely believed to cause health problems. However, policies seeking to relieve financial stress by limiting debt levels of poor households may directly worsen their economic well-being. We evaluate an alternative policy – increasing the repayment flexibility of debt contracts. A field experiment randomly assigned microfinance clients to a monthly or a traditional weekly installment schedule (N=200). We used cell phones to gather survey data on income, expenditure, and financial stress every 48 hours over seven weeks. Clients repaying monthly were 51 percent less likely to report feeling ‘‘worried, tense, or anxious’’ about repaying, were 54 percent more likely to report feeling confident about repaying, and reported spending less time thinking about their loan compared to weekly clients. Monthly clients also reported higher business investment and income, suggesting that the flexibility encouraged them to invest their loans more profitably, which ultimately reduced financial stress

plos_one_vol_7_no_9_pande_2012.pdf
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

Pages