Anti-poverty programs in developing countries are often difficult to implement; in particular, many governments lack the capacity to deliver payments securely to targeted beneficiaries. We evaluate the impact of biometrically-authenticated payments infrastructure ("Smartcards") on beneficiaries of employment (NREGS) and pension (SSP) programs in the Indian state of Andhra Pradesh, using a large-scale experiment that randomized the rollout of Smartcards over 158 subdistricts and 19 million people. We find that, while far from perfectly implemented, the new system delivered a faster, more predictable, and less corrupt NREGS payments process without adversely affecting program access. For each of these outcomes, treatment group distributions first-order stochastically dominated those of the control group. The investment was cost-effective, as time savings to NREGS beneficiaries alone were equal to the cost of the intervention, and there was also a significant reduction in the "leakage" of funds between the government and beneficiaries. We also find evidence of improvements for pension beneficiaries, but these were typically not significant. Beneficiaries overwhelmingly preferred the new system for both NREGS and SSP programs. Overall, our results suggest that investing in secure payments infrastructure can significantly enhance "state capacity" to implement welfare programs in developing countries.JEL codes: D73, H53, O30, O31
we thank the Omidyar Network (especially Jayant Sinha, CV Madhukar, Surya Mantha, and Sonny Bardhan) and the Bill and Melinda Gates Foundation (especially Dan Radcliffe) for the financial support that made this study possible. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.
(1974) argued that if there is some chance of detecting and dismissing corrupt agents then the principal can mitigate the problem by paying an efficiency wage. Intuitively, agents have an incentive to cheat less today in order to improve their chances of earning a wage premium (or pension) tomorrow. Subsequent work has maintained this emphasis on contracts designed to offer future rents.
2In contrast, the literature has put less emphasis on the role played by expectations of illicit future rents. This paper focuses explicitly on the dynamic trade-off between extracting rents today and improving one's chances of surviving to extract rents tomorrow. We call this latter motive the "golden goose" effect to reflect the idea that
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