Publications by Type: Journal Article

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, 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
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
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
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
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

2011
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.

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.

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.

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.

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.

khwaja_a_-_rent_seeking_corruption.pdf
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.

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