(w/ Daniel Gingerich (UVA) and Sandip Sukhtankar (UVA))
Abstract: Screening requirements are common features of fraud and corruption mitigation efforts around the world. Yet imposing these requirements involves trade-offs between higher administrative costs, delayed benefits, and exclusion of genuine beneficiaries on one hand and lower fraud on the other. We examine these trade-offs in one of the largest economic relief programs in US history: the Paycheck Protection Program (PPP). Employing a database that includes nearly 11.5 million PPP loans, we assess the impact of screening by exploiting temporal variation in the documentation standards applied to loan applications for loans of different values. We find that screening significantly reduced the incidence and magnitude of various measures of loan irregularities that are indicative of fraud. Moreover, our analysis reveals that a subset of borrowers with a checkered history strategically reduced their loan application amounts in order to avoid being subjected to screening. Borrowers without a checkered history engaged in this behavior at a much lower rate, implying that the documentation requirement reduced fraud without imposing an undue administrative burden on legitimate firms. All told, our estimates imply that screening led to a reduction in losses due to fraud equal to at least $744 million.
Bureaucratic Deliberation and Performance: Evidence from a Field Experiment in Benin [Draft available on request]
(w/ Leonard Wantchekon (Princeton) and Lazare Kovo (Emory))
Abstract: Designing accountability systems for bureaucracies remains a key challenge for state capacity development. We carried out a randomized control trial at-scale with local bureaucrats in Benin to investigate whether performance improves with deliberation on external evaluation reports. In the treated municipalities, bureaucrats organized internal meetings to deliberate on issues highlighted in audit reports and surveys of bureaucrats and citizens. We find a positive treatment effect on internal performance of bureaucrats (6.8 pp or 8.7% of the control group mean), while there is no immediate effect on service delivery. We investigated the mechanisms and found that the meetings helped bureaucrats update their beliefs about corruption in the local government, and resulted in a fall in trust and cooperation between bureaucrats. These results suggest that in public sector bureaucracies in which the chance of collusion is high (Tirole, 1986), an intervention that leads to a lower level of cooperation and trust may still improve performance
Spillovers in State Capacity Building: Evidence from the Digitization of Land Records in Pakistan [Draft available on request]
(w/ Clement Minaudier (City University))
Abstract: Strong legal and fiscal capacity is crucial to foster economic development, yet we know little about how these two forms of state capacity interact. Using a newly digitized administrative dataset on agricultural taxation and surveys of local bureaucrats from Punjab, Pakistan, we show that legal capacity reforms can have unintended consequences for fiscal capacity. We exploit the staggered roll-out of the digitization of land records in Punjab as a source of random variation in legal capacity and find that digitization had a negative effect on tax collection. The fall in taxes was not due to a decrease in the tax base. Instead, digitization affected the bureaucracy's capacity to collect taxes. We show that bureaucrats in charge of both land records and tax collection before the reform but only of tax collection after it collected less tax as a percentage of their collection target and were less likely to meet their targets. The paper thus sheds light on the importance of understanding state capacity development from an organisational perspective.
Informal fiscal systems in developing countries [latest version]
(w/ Clement Minaudier (City University) and Sandip Sukhtankar (UVA))
Abstract: Governments in developing countries have low fiscal capacity yet face pressures to provide public goods and services, leading them to rely on various unusual fiscal arrangements. We document one such - hitherto unexplored - arrangement: informal fiscal systems that rely on local bureaucrats to fund the delivery of public goods and services. Using survey data and government accounts from Pakistan, we show that public officials are expected to cover funding gaps in public services and they do so, at least partially, through extracted bribes. We propose a model of bureaucratic agency to explore when governments benefit from sustaining such systems and investigate welfare implications. Informal fiscal systems are more likely to arise when monitoring corruption is difficult relative to monitoring the provision of public services, and politically-important groups of citizens do not bear the full cost of corruption. The existence of such systems can distort the effective incidence of the tax burden, reduce the incentives of government to fight corruption, and legitimize bribe-taking.
Does Ability Matter for Discretionary Promotions in Bureaucracies? Evidence from Pakistan [latest version]
Abstract: Bureaucracies often design rules and constrain discretion to avoid corruption and patronage. I examine discretionary promotions of junior Pakistan Administrative Services (PAS) bureaucrats by their seniors and ask whether seniors promote on the basis of their social ties with the juniors or their ability. I compiled unique data on the abilities of junior officers, including both publicly available recruitment exam rank and information on job performance that is private to senior officials. Utilizing an instrumental variables approach, the findings show that seniors promote on the basis of their private information on the junior's ability rather than public information or social ties. The effects are heterogeneous across teams suggesting that meritocracy is not the norm and seniors care about their reputation as referrers of junior bureaucrats. These results suggest that rather than limiting discretion, policy makers can focus on increasing an alignment of incentives of the decision-makers with the organization.
Team Size and Diversity [latest version]
(w/ Alexia Delfino (Bocconi University) and Brais Álvarez Pereira (Universidade NOVA SBE))
Revise and Resubmit Journal of Economic Behavior and Organization
Abstract: We analyse the relationship between performance, team diversity and size. We first propose a model with knowledge spillovers in production, which predicts that the effect of having a person with a diverse knowledge set within a team increases with the size of the team. We experimentally test the model by randomly assigning students to solve knowledge questions in teams of different sizes, with or without a person with a diverse knowledge set. We find that the benefit of having a diverse rather than a same-skill colleague is greater in larger teams relative to small teams. While this result holds for male students irrespective of the gender of the skill-diverse colleague, for female students it is empirically satisfied only in gender homogeneous teams. These results have implications for how organizations can design their teams to maximize knowledge flows and performance.
Selected Work in Progress
Gender and Choice over Co-workers: Experimental Evidence from Pakistan (w/ Alexia Delfino (Bocconi University), Clement Minaudier (City University), Brais Álvarez Pereira (Universidade NOVA SBE) and Shamyla Chaudry (Lahore School of Economics))
[Status: experiment complete, analysis]
Cleaning Up: The Economics of Urban Waste Recycling in Developing Countries (w/ Saher Asad (World Bank) and Asim I. Khwaja (Harvard))
Charitable donations and violence: Evidence from Pakistan
Abstract: This paper suggests a new channel of violence: the charitable donations channel. I exploit the rules of religious donations coupled with variations in the international price of gold/silver to arrive at a source of exogenous variation for donations. Using district-year level data on average household donations and terrorist attacks in Pakistan for the years 2001-2013, I ﬁnd that donations increase the probability of a terrorist attack by 79% and the number of terrorist attacks by 30. All the eﬀect of donations appears to work through an increase in suicide attacks as a speciﬁc terrorism tactic. All other tactics appear unaﬀected.
Based on the MRes paper: The Economic Causes of Terror: Evidence from Rainfall Variation and Terrorist Attacks in Pakistan [click here]