Publications by Year: 2014

2014
Singhal, Monica, and Lucie Gadenne. 2014. “Decentralization in Developing Economies.” Annual Review of Economics 6: 581-604. Publisher's VersionAbstract

Standard models of fiscal federalism suggest many benefits of decentralization in developing economies, and there has been a recent push toward decentralization around the world. However, developing countries presently still have less decentralization, particularly on the revenue side, than both developed countries today and the United States and Europe historically. We consider how the trade-offs associated with fiscal federalism apply in developing countries and discuss reasons for their relatively low levels of decentralization. We also consider additional features relevant to federalism in developing economies, such as the prevalence of nongovernmental organizations and the role of social incentives in policy design.

Singhal, Monical. 2014. “Dodging the Taxman: Firm Misreporting and Limits to Tax Enforcement”. Publisher's VersionAbstract

Reducing tax evasion is a key priority for many governments, particularly in developing countries. A growing literature has argued that the ability to verify taxpayer self-reports against reports from third parties is critical for modern tax enforcement and the growth of state capacity. However, there may be limits to the effectiveness of third-party information if taxpayers can make offsetting adjustments on less verifiable margins. We present a simple framework to demonstrate the conditions under which this will occur and provide strong empirical evidence for such behavior by exploiting a natural experiment in Ecuador. We find that when firms are notified by the tax authority about detected revenue discrepancies on previously filed corporate income tax returns, they increase reported revenues, matching the third-party estimate when provided. Firms also increase reported costs by 96 cents for every dollar of revenue adjustment, resulting in minor increases in total tax collection.

Singhal, Monica. 2014. “Tax Morale.” Journal of Economic Perspectives 28 (4): 149-168. Publisher's VersionAbstract

Standard economic models of tax compliance have focused on enforcement-driven compliance. Notably, tax administrators also tend to place a great deal of emphasis on the importance of improving “tax morale” by encouraging voluntary compliance, creating a culture of compliance, and changing social norms. Tax morale does indeed appear to be an important component of compliance decisions, and there is strong evidence that tax morale operates through a variety of underlying channels. There is less evidence - to date - that indicates we know how to leverage these channels to improve compliance and revenue collection in a consistently successful way.

Pande, Rohini, Sean Lewis-Faupe, Yusuf Negger, and Benjamin A. Olken. 2014. “Can Electronic Procurement Improve Infrastructure Provision?Evidence from Public Works in India and Indonesia.” American Economic Journal: Public Policy.Abstract

Poorly functioning, and often corrupt, public procurement procedures are widely faulted for the low quality of infrastructure provision in developing countries. Can electronic procurement (e-procurement), which reduces both the cost of acquiring tender information and personal inter-action between bidders and procurement officials, ameliorate these problems? In this paper we develop a unique micro-dataset on public works procurement from two fast-growing economies, India and Indonesia, and use regional and time variation in the adoption of e-procurement across both countries to examine its impact. We find no evidence that e-procurement reduces prices paid by the government, but do find that it is associated with quality improvements. In India, where we observe an independent measure of construction quality, e-procurement improves the average road quality, and in Indonesia, e-procurement reduces delays in completion of public works projects. Bidding data suggests that an important channel of influence is selection {regions with e-procurement have a broader distribution of winners, with (better) winning bidders more likely to come from outside the region where the work takes place. On net, the results suggest that e-procurement facilitates entry from higher quality contractors

pande_r_-_can_electronic_procurement_infrastructure_july_2014.pdf
Pande, Rohini, Esther Duflo, Michael Greenstone, and Nicholas Ryan. 2014. “The Value of Regulatory Discretion: Estimates from Environmental Inspection in India”. Publisher's VersionAbstract

In collaboration with a state environmental regulator in India, we conducted a field experiment to raise the frequency of environmental inspections to the prescribed minimum for a random set of industrial plants. The treatment was successful when judged by process measures, as treatment plants, relative to the control group, were more than twice as likely to be inspected and to be cited for violating pollution standards. Yet the treatment was weaker for more consequential outcomes: the regulator was no more likely to identify extreme polluters (i.e., plants with emissions five times the regulatory standard or more) or to impose costly penalties in the treatment group. In response to the added scrutiny, treatment plants only marginally increased compliance with standards and did not significantly reduce mean pollution emissions. To explain these results and recover the full costs of environmental regulation, we model the regulatory process as a dynamic discrete game where the regulator chooses whether to penalize and plants choose whether to abate to avoid future sanctions. We estimate this model using original data on 10,000 interactions between plants and the regulator. Our estimates imply that the costs of environmental regulation are largely reserved for extremely polluting plants. Applying the cost estimates to the experimental data, we find the average treatment inspection imposes about half the cost on plants that the average control inspection does, because the randomly assigned inspections in the treatment are less likely than normal discretionary inspections to target such extreme polluters.

Callen, Michael, Eli Berman, Clark Gibson, and James D. Long. 2014. “Election Fairness and Government Legitimacy in Afghanistan”. Publisher's VersionAbstract

International development agencies invest heavily in institution building in fragile states, including expensive interventions to support democratic elections. Yet little evidence exists on whether elections enhance the domestic legitimacy of governments. Using the random assignment of an innovative election fraud-reducing intervention in Afghanistan, we find that decreasing electoral misconduct improves multiple survey measures of attitudes toward government, including: (1) whether Afghanistan is a democracy; (2) whether the police should resolve disputes; (3) whether members of parliament provide services; and (4) willingness to report insurgent behavior to security forces.

election_fairness_govt_legity_in_afghanistan.pdf
Callen, Michael, Saad Gulzar, Ali Hasanain, and Yasir Khan. 2014. “The Political Economy of Public Sector Absence: Experimental Evidence from Pakistan”.Abstract

In many developing countries, public sector absence is both common and resistant to reform. One explanation is that politicians preferentially provide public jobs with limited work requirements as patronage. We test this patronage hypothesis in Pakistan using: (i) a randomized evaluation of a novel smartphone absence monitoring technology; (ii) data on election outcomes in the 240 constituencies  where the experiment took place; (iii) attendance recorded during unannounced visits; (iv) surveys of connections between politicians and health staff; and (v) a survey of the universe of health supervisors. Four sets of results are consistent with this view. First, 36 percent of health officers report interference by a politician in the previous year when sanctioning an employee and report this twice as often in uncompetitive constituencies. Second, doctors are 21 percentage points less likely to be present if they know their politician, 32 percentage points less likely to be present if they work in an uncompetitive constituency, and are only at work during 10 percent of normal reporting hours if both conditions are true. Third, the effect of the smartphone monitoring technology, which almost doubled inspection rates, is highly localized to competitive constituencies and to monitored employees who do not know their politician. Last, we find evidence that program impact is in part due to the transmission of information to senior officers. We test this by manipulating the salience of staff absence in data presented to senior officials using an online dashboard. Highlighting absence leads to larger subsequent improvements in attendance for facilities located in a competitive constituencies.

pol_economy_of_pub_sector_absence_-_sept_9_2014.pdf
Callen, Michael, Joshua Blumenstock, and Tarek Ghani. 2014. “Violence and Financial Decisions: Evidence from Mobile Money in Afghanistan”.Abstract

We examine the relationship between violence and nancial decisions in Afghanistan. Using three separate data sources, we nd that individuals experiencing violence retain more cash and are less likely to adopt and use mobile money, a newfinancial technology. We first combine detailed information on the entire universe of mobile money transactions in Afghanistan with administrative records for all violent incidents recorded by international forces, and find a negative relationship between violence and mobile money use. Second, in the context of a randomized control trial, violence is associated with decreased mobile money use and greater cash balances. Third, in financial survey data from nineteen of Afghanistan's 34 provinces, we find that individuals experiencing violence hold more cash. Collectively, the evidence indicates that individuals experiencing violence prefer cash to mobile money. More speculatively, it appears that this is principally because of concerns about future violence. The degree of the relationship between cash holdings and violence is large enough to suggest that robust formal nancial networks face severe challenges developing in conflict environments.

violence_finl_decisions_paper_426.pdf
Yanagizawa-Drott, David, and Filipe Campante. 2014. “Do Campaign Contribution Limits Matter? Evidence from the McCain-Feingold Act”.Abstract

We propose a novel method to estimate the impact of campaign contribution limits, and use it to study the effect on U.S. House Elections of the increased limits introduced by the Bipartisan Campaign Reform (”McCain-Feingold”) Act enacted after the 2002 elections. We first estimate the amount of contributions that had been left unrealized by the presence of the relatively strict limit and were then brought into existence by the reform, and then analyze whether and how the change affected election outcomes and the behavior of politicians. The results indicate that aggregate contributions were 25 percent higher as a result of the higher limit, and that this increase disproportionally went to Republican candidates. We further show that the contributions brought in by the reform led to significantly higher turnout in the 2004 elections (2.6% increase in response to a 10% increase in individual contributions). This effect was essentially driven by an increase in the mobilization of Republican voters, with no evidence of increased mobilization of Democratic voters, consistent with the fact that the Republican candidates on average attracted more of the contributions induced by the reform. A roll-call analysis further shows that incumbent Democratic legislators responded, in the 2003-2004 Congress, by becoming relatively less liberal in places with more new contributions induced by the reform. Together, our results provide evidence that raising limits on individual campaign contributions can affect elections and the incentives faced by politicians in ways that increase political participation, but disproportionally benefit certain political parties.

do_campaign_contribution_limits_matter_-_feb_2014.pdf
Yanagizawa-Drott, David, and Thorsten Rogall. 2014. “The Legacy of Political Mass Killings: Evidence from the Rwandan Genocide”.Abstract

We study how political mass killings affect later economic performance, using data from the Rwandan Genocide. To establish causality, we build on and exploit village-level variation in reception of a state-sponsored radio station (RTLM) that explicitly, and successfully, incited killings of the ethnic Tutsi minority population. Our results show that households in villages that experienced higher levels of violence induced by the broadcasts have higher living standards six years after the genocide. They own more assets, such as land, livestock and durable goods. Output per capita from agricultural production is higher, and  consumption levels are greater. These results are consistent with the Malthusian hypothesis that mass killings can raise living standards by reducing the population size and redistributing productive assets from the deceased to the remaining population. However, we also find that the violence affected the age distribution in villages, raised fertility rates among female survivors, and reduced cognitive skills of children. Together, our results show that political mass killings can have positive effects on living standards among survivors in the short run, but that these effects may disappear in the long run.

the_legacy_of_political_mass_killings_-_march_2014.pdf
Yanagizawa-Drott, David. 2014. “Propaganda and Conflict: Evidence from the Rwandan Genocide.” The Quarterly Journal of Economics 129 (4): 1947-1994. Publisher's VersionAbstract

This paper investigates the role of mass media in times of conflict and state-sponsored mass violence against civilians. We use a unique village-level dataset from the Rwandan Genocide to estimate the impact of a popular radio station that encouraged violence against the Tutsi minority population. The results show that the broadcasts had a significant impact on participation in killings by both militia groups and ordinary civilians. An estimated 51,000 perpetrators, or approximately 10 percent of the overall violence, can be attributed to the station. The broadcasts increased militia violence not only directly by influencing behavior in villages with radio reception, but also indirectly by increasing participation in neighboring villages. In fact, spillovers are estimated to have caused more militia violence than the direct effects. Thus, the paper provides evidence that mass media can affect participation in violence directly due to exposure, and indirectly due to social interactions.

propaganda_conflict_evidence_from_rwandan_genocide_-_qje_2014.pdf
Hanna, Rema, and Michael Greenstone. 2014. “Environmental Regulations, Air and Water Pollution, and Infant Mortality in India.” American Economic Review 104 (October 2014) (10): 3038-3072. Publisher's VersionAbstract

Using the most comprehensive developing country dataset ever compiled on air and water pollution and environmental regulations, the paper assesses India's environmental regulations with a difference-in-differences design. The air pollution regulations are associated with substantial improvements in air quality. The most successful air regulation resulted in a modest but statistically insignificant decline in infant mortality. In contrast, the water regulations had no measurable benefits. The available evidence leads us to cautiously conclude that higher demand for air quality prompted the effective enforcement of air pollution regulations, indicating that strong public support allows environmental regulations to succeed in weak institutional settings.

envl_regs_infant_mortality.pdf
Hanna, Rema, Vivi Alatas, Abhijit Banerjee, Benjamin Olken, Matthew Wai-Poi, and Ririn Purnamasari. 2014. Targeting the Poor: Evidence from a Field Experiment in Indonesia. 12th ed. Vol. Impact Evaluation Report. International Initiative for Impact Evaluation (3ie), Impact Evaluation Report, 12. Publisher's VersionAbstract

Governments of developing countries often lack verifiable income information for poor people and communities. This makes targeting for social programs a challenge. This report provides results from a randomised control trial that was designed to better understand how to improve targeting in Indonesia. Specifically, during the expansion of Indonesia’s real conditional cash transfer program, Program Keluarga Harapan (PKH), we randomized three different targeting methodologies — proxy means testing, self-targeting and community targeting – across 600 villages. We found that, when poverty is defined by consumption, self-targeting identifies poorer beneficiaries than proxy means testing and it has lower administrative costs. Community targeting is less effective than proxy means testing in identifying the poor based on per capita consumption, but it results in higher satisfaction levels with the program.

Banerjee, Abhijit, Donald Green, Jeffrey McManus, and Rohini Pande. 2014. “Are Poor Voters Indifferent to Whether Elected Leaders are Criminal or Corrupt? A Vignette Experiment in Rural India.” Political Communications 31 (3): 391-407.Abstract

Although in theory, elections are supposed to prevent criminal or venal candidates from winning or retaining office, in practice voters frequently elect and re-elect such candidates. This surprising pattern is sometimes explained by reference to voters’ underlying preferences, which are thought to favor criminal or corrupt candidates because of the patronage they provide. This paper tests this hypothesis using data from the Indian state of Uttar Pradesh, where one in four representatives in the state legislature has a serious criminal record and where political corruption is widespread. Contrary to the voter preference hypothesis, voters presented with vignettes that randomly vary the attributes of competing legislative candidates for local, state, and national office become much less likely to express a preference for candidates who are alleged to be criminal or corrupt. Moreover, voters’ education status, ethnicity, and political knowledge are unrelated to their distaste for criminal and venal candidates. The results imply that the electoral performance of candidates who face serious allegations likely reflects factors other than voters’ preferences for patronage, such as limited information about candidate characteristics or the absence of credible alternative candidates with clean records. 

journal_of_political_communications_vol_31_no_3_pande_2014.pdf
Pande, Rohini, Benjamin Feigenberg, Erica Field, Natalia Rigol, and Shayak Sarkar. 2014. “Do Group Dynamics Influence Social Capital Gains Among Microfinance Clients? Evidence From a Randomized Experiment in Urban India.” Journal of Policy Analysis and Management 33 (4): 932-949. journal_of_policy_analysis_vol_33_no_4_pande_2014.pdf
Callen, Michael, Mohammad Isaqzadeh, James Long, and Charles Sprenger. 2014. “Violence and Risk Preference: Experimental Evidence from Afghanistan.” American Economic Review 104 (1): 123-148.Abstract

We investigate the relationship between violence and economic risk preferences in Afghanistan combining: (i) a two-part experimental procedure identifying risk preferences, violations of Expected Utility, and specific preferences for certainty; (ii) controlled recollection of fear based on established methods from psychology; and (iii) administrative violence data from precisely geocoded military records. We document a specific preference for certainty in violation of Expected Utility. The preference for certainty, which we term a Certainty Premium, is exacerbated by the combination of violent exposure and controlled fearful recollections. The results have implications for risk taking and are potentially actionable for policymakers and marketers.

american_economic_review_vol_104_no_1_callen_2014.pdf
Yanagizawa-Drott, David. 2014. “Propaganda and Conflict: Evidence from the Rwandan Genocide.” Quarterly Journal of Economics 129 (4). Publisher's VersionAbstract

This paper investigates the role of mass media in times of conflict and state-sponsored mass violence against civilians. We use a unique village-level dataset from the Rwandan Genocide to estimate the impact of a popular radio station that encouraged violence against the Tutsi minority population. The results show that the broadcasts had a significant impact on participation in killings by both militia groups and ordinary civilians. An estimated 51,000 perpetrators, or approximately 10 percent of the overall violence, can be attributed to the station. The broadcasts increased militia violence not only directly by influencing behavior in villages with radio reception, but also indirectly by increasing participation in neighboring villages. In fact, spillovers are estimated to have
caused more militia violence than the direct effects. Thus, the paper provides evidence that mass media can affect participation in violence directly due to exposure, and indirectly due to social interactions.

Greenstone, Michael, and Rema Hanna. 2014. “Environmental Regulations, Air and Water Pollution, and Infant Mortality in India.” American Economic Review 104 (10): 3038-72. Publisher's VersionAbstract
Using the most comprehensive developing country dataset ever compiled on air and water pollution and environmental regulations, the paper assesses India's environmental regulations with a difference-in-differences design. The air pollution regulations are associated with substantial improvements in air quality. The most successful air regulation resulted in a modest but statistically insignificant decline in infant mortality. In contrast, the water regulations had no measurable benefits. The available evidence leads us to cautiously conclude that higher demand for air quality prompted the effective enforcement of air pollution regulations, indicating that strong public support allows environmental regulations to succeed in weak institutional settings.
Hanna, Rema, and Shing-yi Wang. 2014. “Dishonesty and Selection into Public Service”.Abstract

In this paper, we demonstrate that university students who cheat on a simple task in a laboratory setting are more likely to state a preference for entering public service. Importantly, we also show that cheating on this task is predictive of corrupt behavior by real government workers, implying that this measure captures a meaningful propensity towards corruption. Students who demonstrate lower levels of prosocial preferences in the laboratory games are also more likely to prefer to enter the government, while outcomes on explicit, two-player games to measure cheating and attitudinal measures of corruption do not systematically predict job preferences. We find that a screening process that chooses the highest ability applicants would not alter the average propensity for corruption among the applicant pool. Our findings imply that differential selection into government may contribute, in part, to corruption. They also emphasize that screening characteristics other than ability may be useful in reducing corruption, but caution that more explicit measures may offer little predictive power.

rwp13-049_-_dishonesty_in_pub_serv.pdf
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.

reportcards_june2014.pdf

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