While corruption crackdowns have been shown to effectively reduce missing government expenditures, their effects on public service delivery have not been credibly documented. This matters because, if corruption generates incentives for bureaucrats to deliver those services, then deterring it might actually hurt downstream outcomes. This paper exploits variation from an anti-corruption program in Brazil, designed by the federal government to enforce guidelines on earmarked transfers to municipalities, to study this question. Combining random audits with a differences-in-differences strategy, we find that the anti-corruption program greatly reduced occurrences of overinvoicing and off-the-record payments, and of procurement manipulation within health transfers. However, health indicators, such as hospital beds and immunization coverage, became worse as a result. Evidence from audited amounts suggests that lower corruption came at a high cost: after the program, public spending fell by so much that corruption per dollar spent actually increased. These findings are consistent with those responsible for procurement dramatically reducing purchases after the program, either because they no longer can capture rents, or because they are afraid of being punished for procurement mistakes.
This paper tests whether uncertainty about future rainfall affects farmers’ decision-making through cognitive load. Behavioral theories predict that rainfall risk could impose a psychological tax on farmers, leading to material consequences at all times and across all states of nature, even within decisions unrelated to consumption smoothing, and even when negative rainfall shocks do not materialize down the line. Using a novel technology to run lab experiments in the field, we combine recent rainfall shocks and survey experiments to test the effects of rainfall risk on farmers’ cognition, and find that it decreases farmers’ attention, memory and impulse control, and increases their susceptibility to a variety of behavioral biases. In theory, insurance could mitigate those effects by alleviating the material consequences of rainfall risk. To test this hypothesis, we randomly assign offers of an index insurance product, and find that it does not affect farmers’ cognitive load. These results suggest that farmers’ anxiety might be relatively difficult to alleviate.
While there is increasing evidence that enhancing the communication between schools and parents significantly improves students’ performance, less is known about what mechanisms drive those effects. Is it because communication primarily alleviates the moral hazard problem between parents and children, by providing parents with information about attendance and grades? Or is it because because parents have limited attention, and communication makes parenting “top of mind”? We randomly assign communication interventions at the school and student levels, within a sample of Brazilian public schools, in order to estimate the impacts of each of those mechanisms on parental engagement and students’ outcomes. Our design also allows investigating how different mechanisms interact. Results are forthcoming.
This paper investigates whether poverty affects parenting, through cognitive function. While there is evidence that low-cost interventions can significantly improve parenting, trickling-down to better student behavior and outcomes at school, such interventions have much weaker effects among the most disadvantaged families. One hypothesis for why that might be is that poverty impedes cognitive function (Mani et al, 2013), capturing poor parents’ attention, memory and impulse control. We test this hypothesis by running lab experiments to measure parents’ executive functions. This psychological theory also predicts that poverty should enhance focus, by making poor parents relatively better at tasks framed in monetary terms. To test this hypothesis, we design a low-cost intervention aimed at improving parental engagement, delivering weekly text messages (SMS) to support best parenting practices in Brazil over 8 months of the school year. We develop two versions of this intervention – one that frames the consequences of good parenting in monetary terms, and one that does not – and randomly assign parents to either version of the treatment or to a control group. We then test the focus enhancement mechanism, by comparing parents in the monetary framing treatment to those in the neutral framing one, and to those in the control group. Results are forthcoming.
While higher insurance take-up remains a challenge in the developing world, more accurate rainfall forecasts could play the same role (Rosenzweig and Udry, 2014). In practice, there are multiple sources of rainfall forecasts, with wide variation in accuracy, and it is unclear how farmers weigh in different sources to form expectations. This paper randomly assigns information about the local accuracy of alternative sources of rainfall forecasts and documents how doing so affects farmers' perceived reliability of each source, and their expectations about rainfall throughout the rainy season. We track farmers’ expectations weekly over SMS, and incentivize correct forecasts for truthful reporting. Results are forthcoming.
Entrepreneurship is usually identified as an important determinant of aggregate productivity and long-term growth. The determinants of entrepreneurship, nevertheless, are not entirely understood. A recent literature has linked entrepreneurship to the development of the justice system. This paper contributes to this literature by evaluating the role of access to justice in determining the incidence of entrepreneurship. We explore the creation of Special Civil Tribunals in the Brazilian state of São Paulo during the 1990s. Special Civil Tribunals increased the geographic presence of the justice system, simplified judicial procedures, and increased the speed of adjudication of disputes. Using census data and an instrumental variable strategy, we find that implementation of Special Civil Tribunals led to increased entrepreneurship among individuals with higher levels of education. Results do not seem to be related to other changes in public good provision at the local level nor to pre-existing trends.
Conditional cash transfers boosted a major reduction in poverty and a significant decrease in inequality in developing countries over the past decade. However, their success in promoting economic development is challenged by the claim that they deal with short-term poverty relief without providing the poor with the tools for breaking away from poverty by their own means. This claim, however, could be dismissed if conditional cash transfers had an effect on entrepreneurship. This paper assesses whether Bolsa-Familia increases the probability of starting a new venture in Brazil, decomposing its potential effects into three channels: alleviation of the wealth constraint, insurance against negative outcomes of risky activities, and reduction of the labor supply of children (through the effect of the conditionality). The effect of each of these channels is separately estimated using data from National Household Surveys in 2004 and 2006, for which the households of transfer beneficiaries can be identified. The results indicate that entrepreneurship is indeed stimulated by the program in urban areas throughout the insurance and wealth constraint alleviation effects, notwithstanding that new ventures are typically secondary sources of income. Finally, the conditionality seems not to have an impact on the level of entrepreneurship.