sunk costs uncertainty and market exit a real options perspective in this article we examine whether the option value of keeping an operation alive will deter firms from exiting an industry we find that uncertainty dissuades firms from exiting an industry but only when the sunk costs of entering and exiting that industry are sizeable moreover we argue and find that sunk costs can be influenced by the technological intensity of an industry by the extent to which a firm competes on the basis of innovation and by the firm s diversification strategy copyright 2009 the author 2009 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

does local school control raise student outcomes evidence on the roles of school autonomy and parental participation abstract school autonomy and parental participation have been frequently proposed as ways of making schools more productive less clear is how governments can foster decentralized decision making by local schools this article shows that across eight latin american countries most of the variation in local control over school decisions exists within and not between countries that implies that the exercise of local authority to manage schools is largely a local choice only modestly influenced by constitutional stipulations regarding jurisdiction over school personnel curriculum and facilities as a consequence estimated impacts of local school autonomy parental participation or school supplies on student performance must account for the endogeneity of local efforts to manage schools empirical tests confirm that local managerial effort by the principal and parents and the adequacy of school supplies are strongly influenced by parental human capital and the size and remoteness of the community and th

institutional traps and economic growth this article s point of departure is that low quality institutions concentration of political power and material wealth and underdevelopment are persistent over time its analytical model views an equal distribution of political power as a commitment device to enhance institutional quality thereby promoting growth the politically powerful coalition contemplates relinquishing of its power through democratization weighing this advantageous consequence against the limit on own appropriative ability that it entails the possibility of two developmental paths is exhibited with concentration of political and economic power low quality institutions and slow growth and a more equal distribution of political and economic resources high quality institutions and faster growth

ethnic heterogeneity and public goods provision in zambia evidence of a subnational diversity dividend the diversity debit hypothesis that ethnic diversity has a negative impact on social economic and political outcomes has been widely accepted in the literature indeed with respect to public goods provision the focus of this article the conventional wisdom holds that a negative relationship between ethnic heterogeneity and public goods provision is so well established empirically that future research should abandon examination of whether such a relationship exists and focus instead on why it exists that is on the mechanisms underlying a negative relationship this article challenges the conventional wisdom on empirical grounds it demonstrates at the sub national level strong evidence for a diversity dividend that is a positive relationship between ethnic heterogeneity and some measures of public goods provision in particular welfare outcomes related to publicly provided goods and services building on the literature the article draws on new analysis at district level for zambia using a new dataset compiled by the authors from administrative budget and survey data which cover a broader range of public goods outcomes than previous work including information on both budgetary and welfare outcomes the article explores why relationships may differ for sub national budgetary and welfare outcomes considering separate models for each analysis shows results to be robust across a variety of alternative specifications and models given the more nuanced relationship between ethnic diversity and public goods provision documented the article argues that the key task for future work is not to address why the relationship is negative but to study under what conditions such direction holds true and the mechanisms that underlie a diversity dividend it concludes by considering key explanatory hypotheses against the zambian data to identify promising areas for such theory development more broadly while the diversity debit hypothesis highlights the costs of diversity and could be interpreted as providing support for polices that minimize it the findings in this article are consistent with a view that diversity can be good for communities not only for normative reasons but also because under some conditions it can support concrete welfare gains

active and passive waste in government spending evidence from a policy experiment we propose a distinction between active and passive waste as determinants of the cost of public services active waste entails utility for the public decision maker whereas passive waste does not we analyze purchases of standardized goods by italian public bodies and exploit a policy experiment associated with a national procurement agency we find that i some public bodies pay systematically more than others for equivalent goods ii differences are correlated with governance structure iii the variation in prices is principally due to variation in passive rather than active waste and iv passive waste accounts for 83 percent of total estimated waste

subnational climate justice adaptation finance distribution and climate vulnerability summary this article investigates subnational adaptation finance distribution within malawi malawi is highly climate vulnerable and a significant per capita recipient of adaptation finance this empirical study models distribution dynamics through need climate vulnerability and government interest patronage results indicate those areas most in need receive relatively little finance rather donor utility and the ability to absorb capital offer the most persuasive explanations for distribution across the state these findings suggest that the distribution of adaptation funds do not support the larger goal of climate justice

public procurement and rent seeking the case of paraguay summary a model of entrepreneurial choices in an economy with a corrupt public procurement sector is built providing predictions along two dimensions first corrupt public institutions operate by offering contracts without competition and more corrupt entities channel larger share of their budget in this way second these firms enjoy extra returns so that procurement related activities attract the best entrepreneurs a large scale microeconomic database including all public procurement operations over a 4 year period in paraguay amounting annually to approximately 6 of the country s gdp is then used to corroborate these predictions

traditional governance citizen engagement and local public goods evidence from mexico summary we study the governance of public good provision in poor communities in oaxaca mexico we estimate the effect of usos y costumbres a form of participatory democracy prevalent in indigenous communities on the provision of local public goods because governance is endogenous we address selection effects by matching on municipal characteristics and long term settlement patterns using a first differences design we show that these municipalities increase access to electricity sewerage and education faster than communities ruled by political parties we also show they are places of vibrant political participation not authoritarian enclaves protecting the political monopoly of local bosses 2013 elsevier ltd all rights reserved

does greater accountability improve the quality of public service delivery evidence from uganda summary it is now widely realized that in many developing countries the low quality of public services and governance can limit the scope for poverty reduction and growth empirical micro level evidence on the scope for improved accountability to help reduce corruption and improve the quality with which critical public services are provided is however limited using a large data set from uganda to address this issue we find that household knowledge on how to report inappropriate behavior by bureaucrats and unsatisfactory quality of services does help to not only reduce the incidence of corruption but is also associated with significant improvements in service quality

corruption institutions and economic development many scholarly articles on corruption give the impression that the world is populated by two types of people the sanders and the greasers the sanders believe that corruption is an obstacle to de velopment while the greasers believe that corruption can in some cases foster development this paper takes a critical look at these positions it concludes that the evidence supporting the greasing the wheels hypothesis is very weak and shows that there is no cor relation between a new measure of managers actual experience with corruption and gdp growth instead the paper uncovers a strong negative correlation between growth in genuine wealth per capita a direct measure of sustainable development and corruption while corruption may have little average eect on the growth rate of gdp per capita it is a likely source of unsustainable development

government and economic growth in the less developed countries an empirical study for 1960 1980 adam smith founded modern economics with a powerful argument that free markets are the best route to prosperity and economic growth his conclusion has been studied and debated by economists ever since including nobel prize winners friedman hayek kuznets lewis myrdal and schultz whatever economists have concluded since world war ii the majority of the less developed countries seem to have opted for extensive government regulation of the private sector and for a large public sector has the large government role slowed or accelerated the growth of ldcs obviously this is an important issue this study looks at government expenditure revenue raising and regulation greater emphasis is put on expenditure because 1 the revenue raised is presumably a function of the level of expenditure and 2 there are few internationally comparable measures of regulation there are virtually no empirical studies of the general impact of government on economic growth an extensive literature search turned up only three papers gemmell analyzed the impact of nonmarket sector growth on various measures of macroeconomic performance for 27 ldcs and developed countries for 1960 and 1970 he drew no general conclusions about the relation between the size of the nonmarket sector and economic growth marsden found a negative relation between tax gdp ratios and economic growth for a cross section of 20 ldcs and developed countries for the 1970 79 period 2 i found a negative relationship between the share of government consumption expenditure in gdp and the growth of per capita gdp for a cross section of 96 ldcs and developed countries over various time periods between 1961 and 1976 3 this paper extends the approach used in my 1983 article

aid delivery through non governmental organisations does the aid channel matter for the targeting of swedish aid this paper analyses whether aid channelled through non governmental organisations ngos is less affected by selfish donor motivations and better targeted to needy recipient countries than aid distributed by state agencies we employ tobit and probit models and make use of an exceptionally detailed database that allows an assessment of the allocation of swedish aid channelled through ngos in comparison to the allocation of swedish official aid our analysis provides mixed results on the one hand ngos appear to be altruistic as far as available indicators on political and commercial motivations of aid can tell on the other hand needs based targeting of aid by ngos turns out to be surprisingly weak gdp per capita of recipient countries shapes the allocation of official aid but not that of aid channelled through ngos the headcount of absolute poverty has a significantly positive effect on aid allocation but its impact is not particularly strong when ngos are involved overall the swedish case supports the sceptical view that ngos are not necessarily superior donors compared to state aid agencies

power to the people evidence from a randomized field experiment on community based monitoring in uganda this brief summarizes the results of a gender impact evaluation study entitled power to the people evidence from a randomized field experiment on community based monitoring in uganda intervention started in 2004 and consisted of a training and a six month follow up in uganda the study observed that localized nongovernmental organizations encouraged communities to be more involved with the state of health service provision and strengthened their capacity to hold their local health providers to account for performance the community based monitoring project increased the quality and quantity of primary health care provision the program led to a significant increase in the weight of infants by 14 z scores and a significant decrease in child mortality by 33 utilization of outpatient services was significantly higher 20 percent in the treatment group and the overall effect across utilization measures is large and significant funding for the study derived from bank netherlands partnership program world bank research committee world bank africa region division swedish international development agency department for research cooperation

local capture evidence from a central government transfer program in uganda according to official statistics 20 percent of uganda s total public expenditure was spent on education in the mid 1990s most of it on primary education one of the large public programs was a capitation grant to cover schools nonwage expenditures using panel data from a unique survey of primary schools we assess the extent to which the grant actually reached the intended end user schools the survey data reveal that during 1991 1995 the schools on average received only 13 percent of the grants most schools received nothing the bulk of the school grant was captured by local officials and politicians the data also reveal considerable variation in grants received across schools suggesting that rather than being passive recipients of flows from the government schools use their bargaining power to secure greater shares of funding we find that schools in better off communities managed to claim a higher share of their entitlements as a result actual education spending in contrast to budget allocations is regressive similar surveys in other african countries confirm that uganda is not a special case

the impact of corruption on consumer markets evidence from the allocation of second generation wireless spectrum in india abstracttheoretical predictions of the impact of corruption on economic efficiency are ambiguous with models allowing for positive negative or neutral effects while much evidence exists on levels of corruption less is available on its impact particularly its impacts on consumer markets this paper investigates empirically the effect of the corrupt sale of spectrum licenses to ineligible firms on the wireless telecommunications market in india i find that the corrupt allocation had at worst no impact on the number of subscribers prices usage revenues competition and measures of quality i argue that the market based transfer of licenses to competent firms other than the original awardees combined with fierce competition in the telecommunications sector may have mitigated potential deleterious impacts of corruption on consumers these results suggest that the original corrupt allocation did not matter which provides support for the coase theorem

decentralization and public procurement performance new evidence from italy we exploit a new dataset based on european union eu procurement award notices to investigate the relationship between the degree of centralization of public procurement and its performance we focus on the case of italy where all levels of government along with a number of other public institutions are involved in procurement and are subject to the same eu regulation we find that a municipalities and utilities which currently award among the largest shares of contracts achieve lower rebates than other institutional categories and b decentralization implies lower rebates only when it comes with weak competences of procurement officials the evidence seems to suggest that a reorganization of the procurement system both in terms of partial centralization and increased professionalization of procurement officials would help improve award stage procurement performance jel h11 h57 h71 h77

leadership and the voluntary provision of public goods field evidence from bolivia abstract we conduct a controlled field experiment in 52 communities in rural bolivia to investigate the effect that local authorities have on voluntary public good provision in our study community members pool resources to provide environmental education material for local schools we find that voluntary contributions increase when democratically elected local authorities lead by example the results are driven by two factors 1 authorities like other individuals give more when they are called upon to lead than when they give in private and 2 high leader contributions increase the likelihood that others follow both effects are stronger when authorities as compared to randomly selected community members lead by example we explore two underlying sources of leadership influence first we provide evidence that the effect of a leader s contribution is not limited to signaling the value of the public good second we examine how leader characteristics affect the likelihood that others follow specifically our study shows that authority influence is driven by a combination of formal leadership status observable characteristics and the amount that authorities contribute when they give publicly before others

using micro surveys to measure and explain corruption summary this paper discusses survey techniques aimed at a better measurement of corruption at the micro level and argues that with appropriate survey methods and interview techniques it is possible to collect quantitative micro level data on corruption public expenditure tracking surveys service provider surveys and enterprise surveys are highlighted with several applications these surveys permit measurement of corruption at the level of individual agents such as schools health clinics or firms they also permit the study of mechanisms responsible for corruption including capture of public funds and bribery 2005 elsevier ltd all rights reserved

how corruptible are you bribery under uncertainty abstract we model corruption in a society as a result of bargaining for bribes between private citizens and public officials we investigate the role that incomplete information with respect to the intrinsic moral cost of one s potential corruption partner plays out in his or her propensity to engage in bribery and consequently the equilibrium level of corruption in the society we assume that the cost of engaging in corruption is subject to strategic complementarities which may lead to multiple corruption equilibria we find that corruption is lowest when potential bribers and potential bribees are uncertain regarding each other s corruptibility and have asymmetric bargaining powers our uncertainty result provides theoretical support in favor of anti corruption strategies such as staff rotation in public offices aimed at decreasing the social closeness of bribers and bribees our bargaining power result suggests that under uncertainty monopolistic public good provision has the same corruption reducing effect as competitive public good provision

more politicians more corruption evidence from swedish municipalities in the literature on political economy and public choice it is typically assumed that government size correlates positively with public corruption the empirical literature however is inconclusive owing to both measurement problems and endogeneity this paper creates a corruption index based on original data from a survey covering top politicians and civil servants in all swedish municipalities the effect of more politicians on corruption problems is analyzed using discontinuities in the required minimum size of local councils despite the fact that sweden consistently has been ranked among the least corrupt countries in the world the survey suggest that non trivial corruption problems are present in sweden municipalities with more local council seats have more reported corruption problems and the regression discontinuity design suggests that the effect is causal

the culture of corruption tax evasion and economic growth this study uses a dynamic general equilibrium model to quantify the effects of corruption and tax evasion on fiscal policy and economic growth the model is calibrated to match estimates of tax evasion in developing countries the calibrated model is able to generate reasonable predictions for net tax rates the corruption associated with public investment projects and the negative correlation between corruption and tax revenue the presence of corruption and evasion is shown to have significant but not large negative effects on economic growth the relatively moderate effects help explain the absence of a robust negative correlation between growth and corruption in cross country data the model also implies that cracking down on tax evasion before addressing corruption can be a bad idea and that higher wages for public officials can improve welfare jel h3 o4

the simple economics of extortion evidence from trucking in aceh this paper tests whether the behavior of corrupt officials is consistent with standard industrial organization theory we designed a study in which surveyors accompanied indonesian truck drivers on 304 trips during which they observed over 6 000 illegal payments to police soldiers and weigh station attendants using plausibly exogenous changes in the number of checkpoints we show that market structure affects the level of illegal payments we further show that corrupt officials use complex pricing schemes including third degree price discrimination and a menu of two part tariffs our findings illustrate the importance of considering the market structure for bribes when designing anticorruption policy

corruption and the costs of redistribution micro evidence from indonesia this paper examines the degree to which the corruption in developing countries may impair the ability of governments to redistribute wealth among their citizens specifically i examine a large antipoverty program in indonesia that distributed subsidized rice to poor households i estimate the extent of corruption in the program by comparing administrative data on the amount of rice distributed with survey data on the amount actually received by households the central estimates suggest that on average at least 18 of the rice appears to have disappeared ethnically heterogeneous and sparsely populated areas are more likely to be missing rice using conservative assumptions for the marginal cost of public funds i estimate that the welfare losses from this corruption may have been large enough to offset the potential welfare gains from the redistributive intent of the program these findings suggest that corruption may impose substantial limitations on developing countries redistributive efforts and may help explain the low level of transfer programs in developing countries d 2005 elsevier b v all rights reserved

the quality of political institutions and the curse of natural resources we propose a theoretical model to explain empirical regularities related to the curse of natural resources which emphasises the behaviour and incentives of politicians we extend the standard voting model to give voters political control beyond the elections this gives rise to a new restriction that policies should not give rise to a revolution our model clarifies when resource discoveries might lead to revolutions namely in countries with weak institutions it also suggests that for bad political institutions human capital depends negatively on natural resources while for high institutional quality the dependence is reversed this finding is corroborated in cross section regressions

school decentralization helping the good get better but leaving the poor behind abstract the decentralization of public services is a major feature of institutional innovation the main argument in support of decentralization is that it brings decisions closer to the people thereby alleviating information asymmetries and improving accountability however decentralization can also degrade service provision in poor communities that lack the ability to voice and defend their preferences in this paper we analyze the average and distributional effects of school decentralization on educational quality in argentina we find that decentralization had an overall positive impact on student test scores the decentralization gains however did not reach the poor thus although bringing decisions closer to the people may help the good get better the already disadvantaged may not receive these benefits

media monitoring and capture of public funds evidence from madagascar summary this paper investigates the role of media and monitoring in reducing capture we analyze data on capture of public expenditures by local officials in madagascar our findings indicate important constraints on decentralization of public service delivery in particular in remote areas capture could be successfully constrained through a combination of media programs and monitoring intensive monitoring and access to media reduce capture however the impact of media is conditional on characteristics of the population with high illiteracy in poor regions the effectiveness of newspaper and poster campaigns is limited and radio and television programs are more important to reduce capture

corruption perceptions vs corruption reality abstract this paper examines the accuracy of corruption perceptions by comparing indonesian villagers reported perceptions about corruption in a road building project in their village with a more objective measure of missing expenditures in the project i find that villagers reported perceptions do contain real information and that villagers are sophisticated enough to distinguish between corruption in a particular road project and general corruption in the village the magnitude of the reported information however is small in part because officials hide corruption where it is hardest for villagers to detect i also find that there are biases in reported perceptions the findings illustrate the limitations of relying solely on corruption perceptions whether in designing anti corruption policies or in conducting empirical research on corruption

the impact of an unexpected wage cut on corruption evidence from a xeroxed exam this paper aims to understand how corruption responds to an income loss we exploit an unexpected 25 wage cut incurred in 2010 by all romanian public sector employees including the public education staff we investigate a corruptible high stake exam taking place shortly after the wage announcement to measure corruption we compare changes in exam outcomes from 2007 to 2010 between public and private schools as the latter were not affected by the policy we find that the wage loss induced better exam outcomes in public than in private schools and we attribute this difference to increased corruption by public educators

experimental evidence on the economics of rural electrification we present results from an experiment that randomized the expansion of electric grid infrastructure in rural kenya electricity distribution is a canonical example of a natural monopoly experiment

do lenders favor politically connected firms rent provision in an emerging financial market corruption by the politically connected is often blamed for economic ills particularly in less developed economies using a loan level data set of more than 90 000 rms that represents the universe of corporate lending in pakistan between 1996 and 2002 we investigate rents to politically connected rms in banking classifying a rm as political if its director participates in an election we examine the extent nature and economic costs of political rent provision we nd that political rms borrow 45 percent more and have 50 percent higher default rates such preferential treatment occurs exclusively in government banks private banks provide no

regulatory capture a review this article reviews both the theoretical and empirical literatures on regulatory capture the scope is broad but utility regulation is emphasized i begin by describing the stigler peltzman approach to the economics of regulation i then open the black box of influence and regulatory discretion using a three tier hierarchical agency model under asymmetric information in the spirit of laffont and tirole 1993 i discuss alternative modelling approaches with a view to a richer set of positive predictions including models of common agency revolving doors informational lobbying coercive pressure and influence over committees i discuss empirical work involving capture and regulatory outcomes i also review evidence on the revolving door phenomenon and on the impact that different methods for selecting regulators appear to have on regulatory outcomes the last section contains open questions for future research copyright 2006 oxford university press

on the simultaneity problem in the aid and growth debate this paper shows that foreign aid has a significant positive average effect on real per capita gross domestic product gdp growth if and only if the quantitatively large negative reverse causal effect of per capita gdp growth on foreign aid is adjusted for in the growth regression instrumental variables estimates show that a 1 percentage point increase in gdp per capita growth decreased foreign aid by over 4 adjusting for this quantitatively large negative reverse causal effect of economic growth on foreign aid shows that a 1 increase in foreign aid increased real per capita gdp growth by around 0 1 percentage points

fighting corruption to improve schooling evidence from a newspaper campaign in uganda what are the most effective ways to increase primary school enrollment and student learning we argue that innovations in governance of social services may yield the highest return since social service delivery in developing countries is often plagued by inefficiencies and corruption we illustrate this by using data from an unusual policy experiment a newspaper campaign in uganda aimed at reducing capture of public funds by providing schools parents with information to monitor local officials handling of a large education grant program the campaign was highly successful and the reduction in capture had a positive effect on enrollment and student learning jel d73 i22 o12

the marginal rate of corruption in public programs evidence from india abstract optimal fiscal policy depends on the marginal benefits of public spending in developing countries corrupt officials often embezzle funds so optimal policy should reflect marginal corruption we analyze marginal corruption in the context of a statutory wage increase in india s employment guarantee scheme strikingly workers received none of the increase even though initially they were on average overpaid the data are inconsistent with theories of voice in which the threat of complaints limits corruption but consistent with theories of exit in which outside options in the private sector limit how much rent officials can extract

what determines access to piped water in rural areas evidence from small scale supply systems in rural brazil summary this paper investigates whether small scale water supply systems implemented and operated by water user associations increase access to piped water supply in rural brazil by more than systems by local governments starting from 15 to 16 in the year 2000 access rates in rural areas with water user associations increased to 33 4 in 2010 in areas with local government supply systems access rates only increased to 24 9 based on data from brazilian census and the national water and sanitation survey the empirical analysis in this paper shows that the observed difference is effectively due to project type choice additionally it points toward higher accountability as a potential reason for better results of community based projects in municipalities where social groups requested a new system before the local government started implementation and therefore public awareness for the project was higher the increase in access rates is comparable to the increase in municipalities with water user association projects the same is true if local media is present or political competition in local elections is higher as the effect of project type on access rates might be confounded by simultaneous drivers of project type choice and access rates the quantitative analysis is based on a difference in difference estimator in combination with kernel matching to overcome the endogeneity of project type the treatment effect revealed by this analysis is robust to various specification changes and the robustness checks show no structural differences between treatment and control groups that could bias the results the calculation of matching weights for the kernel matching is informed by semi structured interviews with academics and sector experts in brazil explaining the determinants of project choice the interviews highlight the political economy behind infrastructure expansion in rural brazil

i paid a bribe an experiment on information sharing and extortionary corruption abstract theoretical and empirical research on corruption has flourished in the last three decades however identifying successful anti corruption policies remains a challenge in this paper we ask whether bottom up institutions that rely on voluntary and anonymous reports of bribe demands such as the i paid a bribe website first launched in india in 2010 could act as effective anti corruption tools and if this is the case whether and how their effectiveness could be improved we overcome measurement and identification problems by addressing our research questions in the laboratory our results show that the presence of a reporting platform like the i paid a bribe website may be insufficient to systematically lower bribery a more effective platform is one where posts disclose specific information about the size of the bribes and the location of their requestors i e a platform that could serve as a search engine for the least corrupt officials especially if posting is restricted to service recipients our results also show that while citizens rarely post false information lying by officials when allowed to post on the platform is widespread

administrative overspending in indonesian districts the role of local politics summary we analyze the determinants of the excessive administrative spending of local governments in indonesia in an unbalanced panel data set of 399 districts for 2001 09 we show that the proliferation of districts has not led to increased administrative spending instead a lack of political accountability is responsible for this excess the degree of political competition influences the level of administrative spending significantly newly introduced direct elections of district heads however did not curtail the waste

understanding carbon lock in abstract this paper narrative argues that industrial economies have been locked into fossil fuel based energy systems through a process of technological and institutional co evolution driven by path dependent increasing returns to scale it is asserted that this condition termed carbon lock in creates persistent market and policy failures that can inhibit the diffusion of carbon saving technologies despite their apparent environmental and economic advantages the notion of a techno institutional complex is introduced to capture the idea that lock in occurs through combined interactions among technological systems and governing institutions while carbon lock in provides a conceptual basis for understanding macro level barriers to the diffusion of carbon saving technologies it also generates questions for standard economic modeling approaches that abstract away technological and institutional evolution in their elaboration the question of escaping carbon lock in is left for a future paper

can the west save africa in the new millennium the western aid effort toward africa has surged due to writ ings by well known economists a celebrity mass advocacy campaign and decisions by western leaders to make africa a major foreign policy priority this survey contrasts the predominant transformational approach west comprehensively saves africa to occasional swings to a marginal approach west takes one small step at a time to help individual africans evaluation of one step at a time initiatives is generally easier than that of transformational ones either through controlled experiments although these have been oversold or simple case studies where it is easier to attribute outcomes to actions we see two themes emerge from the literature survey 1 escalation as each successive western transformational effort has yielded disappointing results as judged at least by stylized facts since again the econometrics are shaky the response has been to try an even more ambitious effort and 2 the cycle of ideas rather than a progressive testing and discarding of failed ideas we see a cycle in aid ideas in many areas in africa with ideas going out of fashion only to come back again later after some lapse long enough to forget the previous disappointing experience both escalation and cyclicality of ideas are symptomatic of the lack of learning that seems to be characteristic of the transfor mational approach in contrast the marginal approach has had some successes in improving the well being of individual africans such as the dramatic fall in mortality

did iraq cheat the united nations underpricing bribes and the oil for food program from 1997 through 2003 the un oil for food program allowed iraq to export oil for humanitarian supplies we hypothesize that iraq deliberately set the price of its oil below market prices to solicit bribes from oil buyers by comparing the price gap between iraqi oil and its close substitutes during the program to the gap prior to the program we nd evidence of signican t underpricing our central estimate suggests that iraq collected 1 3 billion in bribes from underpricing its oil or 2 percent of oil revenues underpricing is higher during periods of high volatility in oil markets when detection is more dicult but declines after the un limited iraq s ability to set the price of its oil

corruption food subsidies and opacity evidence from the philippines a b s t r a c t we argue that subsidized food distribution systems that fail to publicize how much food has been allocated to each local market will experience high rates of theft on the margin as they are expanded we provide the first comparable cross section of estimates of subsidized food theft as predicted in regions of the philippines that were allocated more subsidized rice to distribute a larger percentage of the rice went missing

aid policies and growth the authors of this paper use a new database on foreign aid to examine the relationships among foreign aid economic policies and growth of per capita gdp in panel growth regressions for 56 developing countries and 6 four year periods 1970 93 they find that the policies that have a great effect on growth are those related to fiscal surplus inflation and trade openness they construct an index for those three policies and have that index interact with foreign aid they have instruments for both aid and aid interacting with policies they find that aid has a positive impact on growth in developing countries with good fiscal monetary and trade policies in the presence of poor policies aid has no positive effect on growth this result is robust in a variety of specifications which include or exclude middle income countries include or exclude outliers and treat policies as exogenous or endogenous they examine the determinants of policy and find no evidence that aid has systematically affected policies either for good or for ill they estimate an aid allocation equation and show that any tendency for aid to reward good policies has been overwhelmed by donors pursuit of their own strategic interests in a counterfactual they reallocate aid reduce the role of donor interests and increasing the importance of policy such a reallocation would have a large positive effect on developing countries growth rates

eight questions about corruption this paper will discuss eight frequently asked questions about public corruption 1 what is corruption 2 which countries are the most corrupt 3 what are the common characteristics of countries with high corruption 4 what is the magnitude of corruption 5 do higher wages for bureaucrats reduce corruption 6 can competition reduce corruption 7 why have there been so few recent successful attempts to fight corruption 8 does corruption adversely affect growth

improving identification of demand side obstacles to schooling findings from revealed and stated preference models in two ssa countries summary efforts to expand primary education have shifted from a policy focus on supply building schools to demand side policies human capital theory posits that common demand side obstacles are high direct costs opportunity costs and low perceived benefits constructs that are difficult to measure empirically this study compares strategies to estimate obstacles to schooling through revealed and stated preferences using similar household survey data from two sub saharan african countries the typical determinants of schooling model underestimates demand side obstacles and gender differences and additional useful information for theory testing and policy is derived from analyzing parents stated preferences as well

public education spending and private substitution in urban china abstract this paper documents robust evidence that increases in public spending on basic education are associated with significant reductions in household private tutoring spending in urban china this reduction comes primarily from the top and bottom income households suggesting multi dimensional demands for private tutoring it concentrates on households with an only boy and is larger for middle school than primary school children increases in public education spending are associated with significant reduction in school tuition which is homogeneous across households of different income levels changes in household spending on textbooks in response to more public education spending are modest but statistically insignificant

missing public funds and targeting performance evidence from an anti poverty transfer program in indonesia abstract this paper investigates how failing to consider missing funds in public resource delivery can lead to misleading conclusions on the nature and correlates of targeting performance combining administrative data on disbursement and household survey data on receipt under indonesia s anti poverty program inpres desa tertinggal idt we find that only 69 of disbursements were actually received by the intended beneficiaries when these missing funds are ignored the distribution of idt benefits is pro poor and better targeting is found in districts with higher per capita expenditure however when the missing funds are taken into account the distribution of idt benefits in fact becomes less pro poor than universal equal distribution and better targeting is correlated with a higher proportion of female village heads and a higher level of villagers human capital these results underscore the importance of considering the size and allocation of missing funds in the analysis of targeting in public resource delivery

various concepts of hysteresis applied in economics different types of hysteresis are applied in order to describe persistence phenomena in micro and macroeconomics on the microeconomic level sunk adjustment costs generate genuine hysteresis where temporary exogenous shocks lead to switches between different branches of an entire input output relation i e multibranch non linearity the shape of the hysteresis loop changes when an adequate aggregation towards a macroeconomic relation is conducted over heterogeneous micro elements hysteresis relations are based on a local structural instability in the case of a branch to branch transition however the persistence characteristics of first order difference differential equations with unit zero roots which are based on a global indifference instability are in economics commonly labelled as hysteresis as well jel classification c62

working for god evidence from a change in financing of nonprofit health care providers in uganda what motivates religious nonprofit health care providers this paper uses a change in financing of nonprofit health care providers in uganda to test two theories of organizational behavior we show

does it pay to participate in decision making survey evidence on land co management in jiangsu province china member participation in decision making is a critical part of resource co management however little is known about the welfare consequences of participation this paper analyzes the impact of cooperative member participation in decision making on their incomes using data from 364 members of china s land cooperative program we distinguish two levels of participation in decision making voting and obtaining financial information and use a bivariate probit model and propensity score matching to estimate their impact the results indicate that household head s age gender and education and family size wealth and political affiliation determine participation in decision making participation in either voting or obtaining financial information has a positive impact on cooperative members land income there is also a strong joint effect of voting and obtaining information with an increase in land income of 16 we conclude that broad participation can ensure more equitable access to land income for members

corruption governance investment and growth in emerging markets the article investigates the potential impact of corruption on economic growth by examining the effect that corruption may have on several significant determinants of economic growth namely investment in human private and public capital and on governance our theoretical approach allows for corruption to influence economic growth directly and indirectly through different investment and governance channels all previous empirical work on this issue has been based on national income and product accounts nipa data which do not normally break down gross domestic investment into its private and public sector and if they do they misclassify investment by public enterprises as private investment potentially biasing empirical findings in this article we use a data set from the international finance corporation that bypasses these problems we find that the impact of corruption on the level of public investment appears to be more ambiguous than it has been found in the previous literature we however

measuring corruption in china an expenditure based approach using household survey data most existing micro level empirical analyses of corruption rely on administrative records special purpose surveys or field experiments which can be difficult or very costly to obtain in some situations in this paper we apply an expenditure based method of quantifying the extent of corruption in a particular country using household survey data this method utilizes discrepancies between consumption and reported income to measure corruption another contribution of this paper is that it provides the first objective estimate of the extent of corruption in china we use a quadratic clothing expenditure function to estimate the extent of corruption in china in 2002

the regressive demands of demand driven development despite their explicit focus on reaching the poor many community driven development cdd projects have been found to be only mildly pro poor in their funding allocations this paper presents evidence of an explanation that has been overlooked in the cdd literature to date the requirement that beneficiaries must apply for projects in order to receive support the authors first examine data on the universe of project applications and funding under tanzania s flagship cdd program tanzania s social action fund and then use a census of 100 program villages to examine the determinants of both program awareness and program participation at the household level the data paint a consistent picture at both levels wealth access to information and political capital are important correlates of the ability to navigate the application process successfully the centrally dictated features of this decentralized program appear to be the most effective mechanisms in directing funds to the poor the results suggest that unless demand driven projects can develop ways of soliciting engagement from a broader cross section of the population they are unlikely to achieve truly progressive targeting

aid and growth regressions this paper examines the relationship between foreign aid and growth in real gdp per capita as it emerges from simple augmentations of popular cross country growth specifications it is shown that aid in all likelihood increases the growth rate and this result is not conditional on good policy there are however decreasing returns to aid and the estimated effectiveness of aid is highly sensitive to the choice of estimator and the set of control variables when investment and human capital are controlled for no positive effect of aid is found yet aid continues to impact on growth via investment we conclude by stressing the need for more theoretical work before this kind of cross country regressions are used for policy purposes

effects of transitory shocks to aggregate output on consumption in poor countries this paper provides instrumental variables estimates of the response of aggregate private consumption to transitory output shocks in poor countries to identify exogenous unanticipated idiosyncratic and transitory variations in national output we use year to year variations in rainfall as an instrumental variable in a panel of 39 sub saharan african countries during the period 1980 2009 our estimates yield a marginal propensity to consume out of transitory output of around 0 2 to explain this result we show using instrumental variables techniques that there is a significant negative effect of transitory output shocks on net current transfers and a significant positive and quantitatively large effect on the trade balance an important implication is that frictions to private financial flows do not necessarily imply large effects of transitory shocks to aggregate output on private consumption in poor countries

how important is the capacity of local governments for improvements in welfare evidence from decentralised uganda abstract decentralisation is often claimed to be effective for improvements in welfare and hence the reduction of poverty but empirical evidence is scarce this paper seeks to gain further insights into the relationship between decentralisation and welfare by investigating the role of local governments capacity for household consumption and school enrolment in uganda using household survey data it finds suggestive evidence that both household consumption and school enrolment are positively related with the level of capacity of district governments

how aid targets votes the impact of electoral incentives on foreign aid distribution despite allegations that foreign aid promotes corruption and patronage little is known about how recipient governments electoral incentives influence aid spending this article proposes a distributional politics model of aid spending in which governments use their informational advantages over donors in order to allocate a disproportionate share of aid to electorally strategic supporters allowing governments to translate aid into votes to evaluate this argument the author codes data on the spatial distribution of multilateral donor projects in kenya from 1992 to 2010 and shows that kenyan governments have consistently influenced the aid allocation process in favor of copartisan and coethnic voters a bias that holds for each of kenya s last three regimes he confirms that aid distribution increases incumbent vote share this evidence suggests that electoral motivations play a significant role in aid allocation and that distributional politics may help explain the gap between donor intentions and outcomes

do elites benefit from democracy and foreign aid in developing countries abstract a popular argument for the absence of any beneficial effects of foreign aid is that it is skimmed by political elites in recipient countries however studies also suggest that aid may be more effective in relatively democratic developing countries by exploring data on income quintiles derived from the world income inequality database for 88 developing countries a set of results indicate that foreign aid and democracy in conjunction are associated with a higher share of income held by the upper quintile it thus appears that foreign aid contrary to popular beliefs leads to a more skewed income distribution in democratic developing countries while the effects are negligible in autocratic countries the paper closes with a discussion of potential mechanisms generating this perverse effect

corruption investments and contributions to public goods experimental evidence from rural liberia we analyze how corruption affects incentives to invest or contribute to public goods we obtain a proxy for corruption among liberian community leaders by keeping track of a flow of inputs associated with a development intervention measuring these inputs before and after giving them in custody to the chief we then use the gap between these measurements missing inputs to explain variation in investment behavior of villagers investment behavior is gauged with two simple artefactual field experiments our main results are that corruption i undermines incentives for voluntary contributions to local public goods and ii may reduce private investments of individuals subject to rent seeking by the chief in real life we also provide weaker evidence that the impact of corruption on investments and contributions to public goods is heterogeneous this impact may be gender specific and appears to vary with accessibility of communities

depressing dependence transfers and economic growth in the german states 1975 2005 abstractdepressing dependence transfers and economic growth in the german states 1975 2005 regional studies most countries pay substantial intergovernmental transfers to poor regions with the aim of achieving regional convergence consequently transfers should have a positive effect on economic growth however it is equally possible that transfers perpetuate underdevelopment this paper studies empirically the effect of intergovernmental transfers on economic growth with a panel of west german states over the period 1975 2005 the findings suggest that transfers do not foster economic growth presumably because the recipients use them to subsidize declining industries

not locked in the overlooked impact of new gas fired generation investment on long term decarbonisation in the uk abstract this paper contrasts the potential increase in gas fired power generation in the uk in the period to 2020 with the ambitious decarbonisation goals set forth for this sector an increase in combined cycle gas turbine ccgt capacity in particular only represents a threat to long term decarbonisation if some lock in exists it is against this background and in the interest of challenging the perception of no significant lock in to gas fired generation that this paper identifies investment lock in as phenomenon of relevance to policy makers the paper determines both direct and indirect ways in which investment in significant new ccgt capacity could negatively impact on the likelihood of meeting decarbonisation goals through locking in the existing technological system it also identifies that the technical lifetime and not just the capital repayment period of ccgt assets is relevant in understanding the strength of the lock in finally a regulatory structure that aligns with the long term targets in place is identified as providing a clear signal for investors and asset owners that may reduce the risk of investment lock in

enforcement for sale lobbying for water in pakistan s indus basin abstract surface irrigation is a common pool resource subject to over exploitation by upstream users we ask to what extent state enforcement of de jure water allocations designed to ensure adequate irrigation to downstream users is up for sale unique data on the land ownership of nearly a quarter million irrigators in pakistan s vast indus basin watershed provide a measure of political influence consistent with an influence driven model the decline in water availability and land values from head to tail is accentuated along channels having greater lobbying power at the head and attenuated along channels having greater lobbying power at the tail our paper shows how power disparities can be leveraged through the administrative state to capture valuable common resources

currency areas and voluntary transfers this paper discusses the relationship between the formation of a currency area and the use of voluntary fiscal transfers between countries we show that there is a trade off between the benefits of flexible exchange rates and the additional risk sharing benefits of voluntary transfers that can be sustained in a currency area we show that whether a currency area is beneficial or not will depend on the magnitude of economic parameter values in particular we show that in a simple two country model and for a plausible set of economic parameter values a currency area is optimal

competition among officials and the abuse of power traditional economic theory suggests that competition among officials providing government goods tends to reduce corruption however empirical evidence does not yet support this view in this paper i show that a corrupt and powerful central authority can use competition among officials to amass resources for itself while competition reduces corruption at the lower level of government corruption at the higher level of government is increased to avoid widespread theft from the central authority competing officials are monitored more intensively than a monopolist hence even though competition among officials generates more consumer surplus it may reduce welfare

has democratization reduced infant mortality in sub saharan africa evidence from micro data does democracy help babies survive in sub saharan africa by using retrospective fertility surveys conducted in 28 african countries i compare the survival of infants born to the same mother before and after democratization to disentangle the effect of democracy from that of changes in population characteristics which is infeasible with country level statistics on infant mortality i find that infant mortality falls by 1 2 percentage points 12 of the sample mean after democratization in the post cold war period relevant aspects of democracy appear to be the combination of multiparty elections and leadership change

lost in the mail a field experiment on crime crime in the mail sector can hamper the development of elec tronic markets we use a field experiment to detect crime and measure its differential impacts we subtly and realistically manipulate the content and information available in mail sent to households and detect high levels of shirking and stealing eighteen percent of the mail never arrived at its des tination and even more was lost if there was even a slight hint of something additional inside the envelope our study demonstrates that privatization has been unable to extricate moral hazard and that crime is strategic and not equally distributed across the population

is more competition always better an experimental study of extortionary corruption using a laboratory experiment we assess whether increasing competition among public officials reduces extortionary corruption we find that increasing the number of providers has no effect on bribe demands when citizens search costs are high but it increases corruption when search costs are low the effect is absent in a parallel setting framed as a standard market which we attribute to citizens using a nonsequential search strategy as opposed to sequential search in the corruption setting we conclude that efforts to reduce search costs such as infrastructure investments are preferable to anti corruption policies aimed at increasing the number of providers jel d73 d49 c91

corrupting learning evidence from missing federal education funds in brazil abstract this paper examines if money matters in education by looking at whether missing resources due to corruption affect student outcomes we use data from the auditing of brazil s local governments to construct objective measures of corruption involving educational block grants transferred from the central government to municipalities using variation in the incidence of corruption across municipalities and controlling for student school and municipal characteristics we find a significant negative association between corruption and the school performance of primary school students students residing in municipalities where corruption in education was detected score 0 35 standard deviations less on standardized tests and have significantly higher dropout and failure rates using a rich dataset of school infrastructure and teacher and principal questionnaires we also find that school inputs such as computer labs teaching supplies and teacher training are reduced in the presence of corruption overall our findings suggest that in environments where basic schooling resources are lacking money does matter for student achievement

informal monitoring and enforcement mechanisms in public service delivery evidence from the public distribution system in india abstract this paper shows that social networks provide informal monitoring and enforcement services that can curb leakages and improve the efficacy of public service delivery we examine india s targeted public distribution system under which poor households are entitled to subsidized grains and fuel we show that scheduled castes scs are more likely to buy grains when facing sc delivery agents but there is no difference in the take up of fuel we develop a theoretical framework positing that increased informal monitoring and enforcement drive our findings we test our theory using observational survey data and unique data that we collected our empirical results provide strong support for the testable implications

money flows water trickles understanding patterns of decentralized water provision in tanzania summary over the past three decades an increasing number of low and middle income countries have decentralized water provision to the local government level and have sought to more thoroughly involve users in service delivery such reforms reflect the twin goals of encouraging greater responsiveness to local needs and promoting sustainability this study illustrates how the aims of decentralization can be undermined in the absence of robust democratic competition and how governments interpret demand by voters in such settings focusing on the tanzanian water sector the paper first traces the distribution of money for water from the central government to the district level next i consider how district governments use these funds to distribute water infrastructure within their jurisdictions using geo referenced data on all 75 000 water points serving rural tanzanians i find that the central government s allocation of money to districts is fairly unresponsive to local needs however the pattern of distribution cannot primarily be explained by politics with the exception of consistent favoritism of the minister for water s home district political favoritism is more pronounced at the local level within districts the distribution of new water infrastructure is skewed to favor localities with higher demonstrated levels of support for the ruling party in addition wealthier and better connected communities those with the resources to more effectively express their demands are significantly more likely to benefit from new construction this suggests that demand responsive approaches to water provision can entrench regressive patterns of distribution

payment mechanisms and antipoverty programs evidence from a mobile money cash transfer experiment in niger abstractcash transfers have become an increasingly important component of social protection policies in both developed and developing countries while such programs are often implemented electronically in developed countries in many developing countries with weak financial infrastructure such transfers are distributed manually resulting in significant costs to program recipients and the public sector alike the introduction of mobile money systems in many developing countries offers new opportunities for distributing cash transfers using data from a randomized experiment of a mobile money cash transfer program in niger we find evidence of benefits of this new system household diet diversity was 9 16 higher among households who received mobile transfers and children ate an additional one third of a meal per day these results can be partially attributed to time savings associated with mobile transfers as program recipients spent less time traveling to and waiting for their transfer they are also

is democracy good for the poor many scholars claim that democracy improves the welfare of the poor this article uses data on infant and child mortality to challenge this claim cross national studies tend to exclude from their samples nondemocratic states that have performed well this leads to the mistaken inference that nondemocracies have worse records than democracies once these and other flaws are corrected democracy has little or no effect on infant and child mortality rates democracies spend more money on education and health than nondemocracies but these benefits seem to accrue to middle and upper income groups

the power of information in public services evidence from education in uganda in this paper we argue that innovations in governance of social services are an effective way to improve outcomes such as attainment of universal primary education to test this hypothesis we explo

inequality and media capture abstract popular support of redistributive policies depends on information they have about the tax system and efficiency of public projects mass media provides a convenient means for manipulating public opinion even when voters understand that the media can be biased i develop a theory of media capture in which the rich can influence information published in a media outlet at a cost the model shows that higher inequality is associated with lower media freedom this effect is stronger in democratic regimes i find empirical support for the model in both panel data and cross country analysis

building state capacity evidence from biometric smartcards in india anti poverty programs in developing countries are often dicult to implement in particular many governments lack the capacity to deliver payments securely to targeted beneciaries we evaluate the impact of biometrically authenticated payments infrastructure smartcards on beneciaries 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 nd that while incompletely implemented the new system delivered a faster more predictable and less corrupt nregs payments process without adversely aecting program access for each of these outcomes treatment group distributions rst order stochastically dominated those of the control group the investment was cost eective as time savings to nregs beneciaries alone were equal to the cost of the intervention and there was also a signicant reduction in the leakage of funds between the government and beneciaries in both nregs and ssp programs beneciaries overwhelmingly preferred the new system for both programs overall our results suggest that investing in secure payments infrastructure can signicantly enhance state capacity to implement welfare programs in developing countries

electoral accountability and corruption evidence from the audits of local governments we show that political institutions affect corruption levels we use audit reports in brazil to construct new measures of political cor ruption in local governments and test whether electoral account ability affects the corruption practices of incumbent politicians we find significantly less corruption in municipalities where mayors can get reelected mayors with reelection incentives misappropriate 27 percent fewer resources than mayors without reelection incentives these effects are more pronounced among municipalities with less access to information and where the likelihood of judicial punish ment is lower overall our findings suggest that electoral rules that enhance political accountability play a crucial role in constraining politician s corrupt behavior jel d72 k42 017

save the poor shoot some bankers bilateral or multilateral organizations control about 90 of official overseas development assistance oda much of which is wasted this note traces aid failure to the daisy chain of principal agent beneficiary relationships linking rich donors to aid bureaucrats to poor recipients waste results when aid middlemen un intentionally misdirect oda waste can be reduced by clarifying domestic goals for oda using fewer middlemen with greater intrinsic motivation empowering recipients and or replacing bureaucracy with markets

integrity for hire an analysis of a widespread customs reform abstract can governments improve bureaucratic performance by hiring integrity from the private sector in the past 2 decades a number of developing countries have hired private firms to conduct preshipment inspections of imports generating independent data on the value and tariff classification of incoming shipments i find that countries implementing such inspection programs subsequently experience large increases in import duty collections by contrast the growth rate of other tax revenues does not change appreciably additional evidence suggests that declines in falsification of import documentation are behind the import duty improvements the programs also lead to declines in undervaluation and misreporting of goods classifications historically this hired integrity appears to have been cost effective with improvements in import duty collections in the first 5 years of a typical inspection program amounting to 2 6 times the program s costs