Publications by Year: 2013

Pande, Rohini, Christine Binzel , and Erica Field. 2013. “Does the Arrival of Formal Financial Institutions Alter Informal Sharing Arrangements? Experimental Evidence from Village India”. Publisher's VersionAbstract

How do processes of development, in particular the arrival of formal financial institutions, influence the risk-sharing capacity of village social networks? To shed light on this question, this paper exploits the randomized branch roll-out by a large rural bank in India. Improved formal financial access leads villagers to increase formal borrowing and reduce informal borrowing and gift exchange within the village. The substitutability of formal for informal borrowing is, in turn, associated with a decline of informal trust-based institutions: the risk-sharing capacity of informal networks falls and villagers are less likely to share resources with network members in non-anonymous dictator games. An overall decline in transfers is accompanied by a shift in transfers away from financial network links and towards social links, suggesting that the availability of formal financial services enables households to shift network investments towards members for whom they feel greater altruism.

Pande, Rohini, Michael Greenstone, Raahil Madhok, and Hardik Shah. 2013. Water Pollution and Public health in India: The Potential for a Market-friendly Approach. Harvard South Asia Institute, 61-67.
Pande, Rohini, and Seema Jayachandran. 2013. “Choice Not Genes: Probable Cause for the India-Africa Child Height Gap.” Economic and Political Weekly, 48, 34, 77-79. Publisher's Version pande_r_-_choice_not_genes.pdf
Pande, Rohini, Benjamin Feigenberg, and Erica Field. 2013. “The Economic Returns to Social Interaction: Experimental Evidence from Microfinance.” Review of Economic Studies (April 2013) 80 (4): 1459-1483. Publisher's VersionAbstract

Microfinance clients were randomly assigned to repayment groups that met either weekly or monthly during their first loan cycle, and then graduated to identical meeting frequency for their second loan. Long-run survey data and a follow-up public goods experiment reveal that clients initially assigned to weekly groups interact more often and exhibit a higher willingness to pool risk with group members from their first loan cycle nearly two years after the experiment. They were also three times less likely to default on their second loan. Evidence from an additional treatment arm show that, holding meeting frequency fixed, the pattern is insensitive to repayment frequency during the first loan cycle. Taken together, these findings constitute the first experimental evidence on the economic returns to social interaction, and provide an alternative explanation for the success of the group lending model in reducing default risk.

Pande, Rohini, Timothy Besley, Jessica Leight, and Vijayendra Rao. 2013. “Long-Run Impacts of Land Regulation:Evidence from Tenancy Reform in India.” Journal of Developmental Economics.Abstract

Land reform policies have been widely enacted across the developing world. How-ever, despite the central importance of land as an asset in low-income economies, evidence about the long-run impact of such policies remains limited. In this paper, we provide evidence about these long-run effects by combining the quasi-random assignment of linguistically similar areas to South Indian states that subsequently pursued different tenancy regulation policies with cross-caste variation in landownership. Roughly thirty years after the bulk of land reform occurred, land inequality is lower in more regulated areas, but the impact differs by caste group. Tenancy reforms increase own-cultivation among middle caste households, but render low caste households more likely to work as daily agricultural laborers. At the same time, an increase in agricultural wages is observed. These results are consistent with credit markets playing a central role in determining the long-run impact of land reform: tenancy regulations increased land sales to the relatively richer and more productive middle caste tenants but reduced land access for poorer low caste tenants

Pande, Rohini, and Petia Topalova. 2013. “Women in Charge.” International Monetary Fund's "Finance and Development," June 2013. Publisher's VersionAbstract

A policy experiment in India suggests that placing female leaders in positions of power can dramatically change public attitudes

Sheely, Ryan. 2013. “Maintaining Local Public Goods: Evidence from Rural Kenya”.Abstract

Political Scientists have produced a substantial body of theory and evidence that explains variation in the availability of local public goods in developing countries. Existing research cannot explain variation in how these goods are maintained over time. I develop a theory that explains how the interactions between government and community institutions shape public goods maintenance. I test the implications of this theory using a qualitative case study and a randomized field experiment that assigns communities participating in a waste management program in rural Kenya to three different institutional arrangements. I find that localities with no formal punishments for littering experienced sustained reductions in littering behavior and increases in the frequency of public clean-ups. In contrast, communities in which government administrators or traditional leaders could punish littering experienced short-term reductions in littering behavior that were not sustained over time.

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, 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?

Levy, Dan, and Dean Yang. 2013. “Competing for Jobs or Creating Jobs? The Impact of Immigration on Native-Born Unemployment in Venezuela, 1980-2003.” Venezuela Before Chávez: Anatomy of an Economic Collapse. Vol. Penn State University Press, Penn State University Press, Ed. Ricardo Hausmann and Francisco R. Rodríguez.Abstract

At the beginning of the twentieth century, Venezuela had one of the poorest economies in Latin America, but by 1970 it had become the richest country in the region and one of the twenty richest countries in the world, ahead of countries such as Greece, Israel, and Spain. Between 1978 and 2001, however, Venezuela’s economy went sharply in reverse, with non-oil GDP declining by almost 19 percent and oil GDP by an astonishing 65 percent. What accounts for this drastic turnabout? The editors of Venezuela Before Chávez, who each played a policymaking role in the country’s economy during the past two decades, have brought together a group of economists and political scientists to examine systematically the impact of a wide range of factors affecting the economy’s collapse, from the cost of labor regulation and the development of financial markets to the weakening of democratic governance and the politics of decisions about industrial policy.

Yanagizawa-Drott, David, Andreas Madestam, Daniel Shoag, and Stan Veuger. 2013. “Do Political Protests Matter? Evidence from the Tea Party Movement.” The Quarterly Journal of Economics 128 (4): 1633-1685. Publisher's VersionAbstract

Can protests cause political change, or are they merely symptoms of underlying shifts in policy preferences? We address this question by studying the Tea Party movement in the United States, which rose to prominence through coordinated rallies across the country on Tax Day, April 15, 2009. We exploit variation in rainfall on the day of these rallies as an exogenous source of variation in attendance. We show that good weather at this initial, coordinating event had significant consequences for the subsequent local strength of the movement, increased public support for Tea Party positions, and led to more Republican votes in the 2010 midterm elections. Policymaking was also affected, as incumbents responded to large protests in their district by voting more conservatively in Congress. Our estimates suggest significant multiplier effects: an additional protester increased  the number of Republican votes by a factor well above one. Together our results  show that protests can build political movements that ultimately affect policymaking, and that they do so by influencing political views rather than solely through the revelation of existing political preferences.

Yanagizawa-Drott, David. 2013. “Propaganda vs. Education; A Case Study of Hate Radio in Rwanda.” Oxford Handbook of Propaganda Studies, ed. Jonathan Auerbach and Russ Castronovo, 378-394. Oxford: Oxford University Press, 378-394.Abstract

sponsored propaganda on political violence. It provides evidence of the hypothesis that basic education can limit the effectiveness of propaganda by increasing access to alternative media sources. It builds on the case study of the Rwandan Genocide in Yanagizawa-Drott (2011), and shows that the propaganda disseminated by the “hate radio” station RTLM did not affect participation in violence in villages where education levels, as measured by literacy rates, were relatively high. A discussion of the potential underlying mechanisms driving the results is presented. The methodological challenges of identifying causal effects of mass media and propaganda are also described, including recent innovations using statistical methods that may be used to overcome those challenges.

Callen, Michael, and Nils B. Weidmann. 2013. “Violence and Election Fraud: Evidence from Afghanistan.” British Journal of Political Science 43 (1): 53-75. Publisher's VersionAbstract
What explains local variation in electoral manipulation in countries with ongoing internal conflict? The theory of election fraud developed in this article relies on the candidates’ loyalty networks as the agents manipulating the electoral process. It predicts (i) that the relationship between violence and fraud follows an inverted U-shape and (ii) that loyalty networks of both incumbent and challenger react differently to the security situation on the ground. Disaggregated violence and election results data from the 2009 Afghanistan presidential election provide empirical results consistent with this theory. Fraud is measured both by a forensic measure, and by using results from a visual inspection of a random sample of the ballot boxes. The results align with the two predicted relationships, and are robust to other violence and fraud measures.
Pande, Rohini, Ben Feigenberg, Erica Field, John Papp, and Natalia Rigol. 2013. “Does the Classic Micro finance Model Discourage Entrepreneurship Among the Poor? Experimental Evidence from India.” American Economic Review, October 2013 103 (6): 2196-2226. Publisher's VersionAbstract

Do the repayment requirements of the classic microfinance contract inhibit investment in high-return but illiquid business opportunities among the poor? Using a field experiment, we compare the classic contract which requires that repayment begin immediately after loan disbursement to a contract that includes a two-month grace period. The provision of a grace period increased short-run business investment and long-run prots but also default rates. The results, thus, indicate that debt contracts that require early re-payment discourage illiquid risky investment and thereby limit the potential impact of microfinance on micro enterprise growth and household poverty.

Hanna, Rema, Vivi Alatas, Abhijit Banerjee, Benjamin A Olken, Ririn Purnamasari, and Matthew Wai-Poi. 2013. “Ordeal mechanism in targeting: theory and evidence from a field experiment in Indonesia”.Abstract

This paper explores whether ordeal mechanisms can improve the targeting of aid programs to the poor ("self-targeting"). We first show that theoretically the impact of increasing ordeals is ambiguous: for example, time spent applying imposes a higher monetary cost on the rich, but may impose a higher utility cost on the poor. We examine these issues by conducting a 400-village field experiment with Indonesia’s Conditional Cash Transfer program (PKH), where eligibility is determined through an asset test. Specifically, we compare targeting outcomes from self-targeting, where villagers came to a central site to apply and take the asset test, against the status quo, an automatic enrollment system among a pool of potential candidates that the village pre-identified. Within self-targeting villages, we find that the poor are more likely to apply, even conditional on whether they would pass the asset test. Exploiting the experimental variation, we find that self-targeting leads to a much poorer group of beneficiaries than the status quo. Selftargeting also outperforms a universal asset-based automatic enrollment system that we construct using our survey data. However, while experimentally increasing the distance to the application site reduces the number of applicants, it does not differentially improve targeting. Estimating our model structurally, we show that there are large unobserved shocks in the decision to apply, and therefore increasing waiting times to 9 hours or more would be required to induce detectable additional selection. In short, ordeal mechanisms can induce self-selection, but marginally increasing the ordeal can impose additional costs on applicants without necessarily improving targeting.

Levy, Dan, Harounan Kazianga, Leigh Linden, and Matt Sloan. 2013. “The effects of "girl-friendly schools": evidence from the BRIGHT School Construction Program in Burkina Faso.” American Economic Journal of Applied Economics 5 (3): 41-62. Publisher's VersionAbstract

We evaluate a 'girl-friendly' primary school program in Burkina Faso using a regression discontinuity design. After 2.5 years, the program increased enrollment by 19 percentage points and increased test scores by 0.41 standard deviations. For those caused to attend school, scores increased by 2.2 standard deviations. Girls' enrollment increased by 5 percentage points more than boys' enrollment, but they experienced the same increase in test scores as boys. The unique characteristics of the schools are responsible for increasing enrollment by 13 percentage points and test scores by 0.35 standard deviations. They account for the entire difference in the treatment effects by gender.

Duflo, Esther, Michael Greenstone, Rohini Pande, and Nichols Ryan. 2013. “What Does Reputation Buy? Differentiation in a Market for Third-party Auditors.” American Economic Review 103 (3): 314-319. Publisher's VersionAbstract

We study differences in quality in the market for third-party environmental auditors in Gujarat, India. We find that, despite the low overall quality, auditors are heterogeneous and some perform well. We posit that these high-quality auditors survive by using their good name to insulate select client plants from regulatory scrutiny. We find two pieces of evidence broadly consistent with this hypothesis: (i) though estimates are not precise, higher-quality auditors appear to be paid more both in their work as third-party auditors and in their complementary work as consultants; and (ii) plants with high-quality auditors incur fewer costly penalties from the regulator.

Duflo, Esther, Michael Greenstone, Rohini Pande, and Nicholas Ryan. 2013. “Truth-Telling by Third-party Auditors and the Response of Polluting Firms: Experimental Evidence from India.” Quarterly Journal of Economics 128 (4): 1-48. Publisher's VersionAbstract

In many regulated markets, private, third-party auditors are chosen and paid by the firms that they audit, potentially creating a conflict of interest. This paper reports on a two- year field experiment in the Indian state of Gujarat that sought to curb such a conflict by altering the market structure for environmental audits of industrial plants to incentivize accurate reporting. There are three main results. First, the status quo system was largely corrupted, with auditors systematically reporting plant emissions just below the standard, although true emissions were typically higher. Second, the treatment caused auditors to report more truthfully and very significantly lowered the fraction of plants that were falsely reported as compliant with pollution standards. Third, treatment plants, in turn, reduced their pollution emissions. The results suggest reformed incentives for third-party auditors can improve their reporting and make regulation more effective.

Chandra, Amitabh, Maurice Dalton, and Jonathan Holmes. 2013. “Large Increases in Spending on Postacute Care in Medicare to the Potential for Cost Savings in These Settings.” Health Affairs 32 (5): 864-872. Publisher's VersionAbstract

Identifying policies that will cut or constrain US health care spending and spending growth dominates reform efforts, yet little is known about whether the drivers of spending levels and of spending growth are the same. Policies that produce a one-time reduction in the level of spending, for example by making hospitals more efficient, may do little to reduce subsequent annual spending growth. To identify factors causing health care spending to grow the fastest, we focused on three conditions in the Medicare population: heart attacks, congestive heart failure, and hip fractures. We found that spending on postacute care—long-term hospital care, rehabilitation care, and skilled nursing facility care—was the fastest growing major spending category and accounted for a large portion of spending growth in 1994–2009. During that period average spending for postacute care doubled for patients with hip fractures, more than doubled for those with congestive heart failure, and more than tripled for those with heart attacks. We conclude that policies aimed at controlling acute care spending, such as bundled payments for short-term hospital spending and physician services, are likely to be more effective if they include postacute care, as is currently being tested under Medicare’s Bundled Payment for Care Improvement Initiative.

Hanna, Rema, Vivi Alatas, Abhijit Banerjee, Benjamin A Olken, Ririn Purnamasari, and Matthew Wai-Poi. 2013. “Does Elite Capture Matter? Local Elites and Targeted Welfare Programs in Indonesia”.Abstract

This paper investigates the impact of elite capture on the allocation of targeted government welfare programs in Indonesia, using both a high-stakes field experiment that varied the extent of elite influence and non-experimental data on a variety of existing government transfer programs. Conditional on their consumption level, there is little evidence that village elites and their relatives are more likely to receive aid programs than non-elites. Looking more closely, however, we find that this overall result masks a difference between different types of elites: those holding formal leadership positions are more likely to receive benefits, while informal leaders are actually less likely to. We show that capture by formal elites occurs during the distribution of benefits under the programs, and not during the processes when the beneficiary lists are determined by the central government. However, while elite capture exists, the welfare losses it creates appear quite small: since formal elites and their relatives are only 9 percent richer than non-elites, are at most about 8 percentage points more likely to receive benefits than non-elites, and represent at most 15 percent of the population, eliminating elite capture entirely would improve the welfare gains from these programs by less than one percent.