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Governance and Development: A Design Perspective - Rohini Pande (JPAL)
Governance and Development: A Design Perspective - Rohini Pande (JPAL)
Governance and Development: A Design Perspective - Rohini Pande (JPAL)
Governance and Development: A Design Perspective - Rohini Pande (JPAL)
Governance and Development: A Design Perspective - Rohini Pande (JPAL)
Governance and Development: A Design Perspective - Rohini Pande (JPAL)
Governance and Development: A Design Perspective - Rohini Pande (JPAL)
Governance and Development: A Design Perspective - Rohini Pande (JPAL)
Governance and Development: A Design Perspective - Rohini Pande (JPAL)
Governance and Development: A Design Perspective - Rohini Pande (JPAL)
Governance and Development: A Design Perspective - Rohini Pande (JPAL)
Governance and Development: A Design Perspective - Rohini Pande (JPAL)
Governance and Development: A Design Perspective - Rohini Pande (JPAL)
Governance and Development: A Design Perspective - Rohini Pande (JPAL)
Governance and Development: A Design Perspective - Rohini Pande (JPAL)
Governance and Development: A Design Perspective - Rohini Pande (JPAL)
Governance and Development: A Design Perspective - Rohini Pande (JPAL)
Governance and Development: A Design Perspective - Rohini Pande (JPAL)
Governance and Development: A Design Perspective - Rohini Pande (JPAL)
Governance and Development: A Design Perspective - Rohini Pande (JPAL)
Governance and Development: A Design Perspective - Rohini Pande (JPAL)
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Governance and Development: A Design Perspective - Rohini Pande (JPAL)

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Roundtable on Development: poverty, corruption, fragmentation and conflict …

Roundtable on Development: poverty, corruption, fragmentation and conflict

Barcelona GSE Summer Forum
Barcelona Graduate School of Economics
June 14, 2013

http://www.barcelonagse.eu/summer-forum.html

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  • 1. Introduction Design Perspective for Governance Designing regulatory Innovation to Reduce Opportunities foGovernance and Development: A DesignPerspectiveRohini Pande(Harvard)
  • 2. Outline1 Corruption and Income: Some Stylized Facts2 Design Perspective3 Improving the Regulatory Framework: One example fromIndia4 Further Avenues
  • 3. Corruption is high in poor countries...Corruption Perceptions Index14/05/2012 19:49rruption perceptions: The usual suspects | The Economist« WikiLeaks and the Iraq war: DatadumpingDomain-name prices: Sex.sells »Recommend 261Submit toredditCorrection: An early version of this map wrongly put France in the same dark orangecategory as Italy. But its score is actually 6.8. Apologies.Related itemsTweetTweet 67 ShareShare 0Period:Read comments on the sites most popular topicsView full-sized opinion cloud »Sponsored byEconomist blogsAnalects | ChinaAmericas view | The AmericasBabbage | Science and technologyBagehots notebook | British politicsBanyan | AsiaBaobab | AfricaBlighty | BritainButtonwoods notebook | Financial markets1 day 1 week 2 weeks 30 days769Like• By all estimates, corruption– both political andbureaucratic – remainsmuch higher in poorcountries.
  • 4. And the costs are high but varied..Paper   Country   Context   Corrup.on  Est.  (in  %)  Reinikka  &  Svensson  (2004)  Uganda   GraB  in  public  spending  of  edu.  funds  intended  to  cover  school’s  nonwage  payments  87%  of  funds  Olken  (2007)   Indonesia   GraB  in  the  building  of  rural  roads  funded  through  a  na.onal  government  program  24%  of  cost  of  the  road  Khwaja  and  Mian  (2005)  Pakistan   Poli.cally  connected  loans   0.3  -­‐  1.9  percent  of  GDP  Hsieh  &  MoreY(2006)  Iraq   Bribes  from  the  under-­‐pricing  of  oil  in  Iraq’s  Oil  For  Food  Program  (OFP)  2%  of  oil  revenues  Source:  Pande,  R.,  and    Olken,  B.  (2011).  Corrup.on  in  Developing  Countries.  Annual  Review  of  Economics.  
  • 5. How do we plug the leaks?
  • 6. Introduction Design Perspective for Governance Designing regulatory Innovation to Reduce Opportunities foCommon Policy Responses to IncreaseAccountability• Democratization: Increase role ofdemocratic institutions inpolicy-making.• Aid Conditionality: For instance,the US government decided to makeaid ( MCA funding) conditionalupon country performance on 17third-party measures of policyperformance.
  • 7. Introduction Design Perspective for Governance Designing regulatory Innovation to Reduce Opportunities foBut...• Income not choice of governanceregime remains the primarypredictor of corruption-­‐1.5  -­‐1  -­‐0.5  0  0.5  1  1.5  Rich  democracy     poor  democracy   Poor  non  democracy  Control  of  corrup,on  (World  Bank  Score  2008)  
  • 8. Introduction Design Perspective for Governance Designing regulatory Innovation to Reduce Opportunities foAnd...• GDP not performance on corruptionindicators remains a strong predictorof subsequent corruption outcomes• Micro evidence from a fieldexperiment in Indonesia showsmixed and diminishing impacts ofconditional aid over time (Olken etal 2013)Figure 3: Time Trend in Bribes and GDP in Vietnam33.544.55BribeShareofRevenue(Average%)6.46.66.877.2RealGDPperCapita(ln)2005 2006 2007 2008 2009 2010GDP per Capita (log)Bribe Share of RevenueThis figure plots real GDP per capita and the average amount of bribe as a share of revenue paid by firms in Vietnam from2005 to 2010. The bribe share variable is averaged across all firms surveyed in the PCI for the corresponding year.
  • 9. Outline1 Corruption and Income: Some Stylized Facts2 Design Perspective3 Improving the Regulatory Framework: One example fromIndia4 Further Avenues
  • 10. Introduction Design Perspective for Governance Designing regulatory Innovation to Reduce Opportunities foOne size fits all solutions unlikely to work: Adesign perspective for governance• Designing institutions that work will require an iterative processthat combines theoretical and empirical insights• Defining the problem: Is it information, incentives or somethingelse (human capital of providers?)• Can we test our hypothesis?• Given the evidence, can we design and test a solution?• A growing literature is beginning to evaluate specific policycontext to identify channels of influence
  • 11. Outline1 Corruption and Income: Some Stylized Facts2 Design Perspective3 Improving the Regulatory Framework: One example fromIndia4 Further Avenues
  • 12. Introduction Design Perspective for Governance Designing regulatory Innovation to Reduce Opportunities foOne Example: The case of India• Average quarterly GDP growth of 7.45% (since 2000) and rankedamong top group of emerging economies by IMF• But growth alone cannot enable sustainable development• India has 55 billionaires on Forbes list and is home to a third ofworld’s poor• High industrial growth but ranked as the worst country performeron air pollution by Yale Environmental performance Index.• And democracy alone cannot deliver effective governance• The world’s largest democracy yet estimates suggest over 1% ofGDP is annually pocketed as bribes. It ranks 132 (very low!) onDoing Business Index
  • 13. Introduction Design Perspective for Governance Designing regulatory Innovation to Reduce Opportunities foIndustrial Growth and Pollution• High Pollution Current air pollution levels in China and Indiaexceed those ever recorded in any developed country. Likely tohave significant health and economic costs• Ineffective Regulation: Low compliance with strict Air andWater regulations; low staff capacity and widespread corruption.• Regulatory Challenge: How can we improve functioning of theregulator so firms are able to remain competitive while investingin cleaner, more efficient technology, rather than finding it cheaperto pay a bribe?
  • 14. The Case of GujaratFigure: Stacks in Surat• Largest share of of post-licensingreform investment of any state inIndia. 8% annual output growthsince 1991-1992.• Home to some of India’s mostpolluted industrial clusters.• This despite the regulatorundertaking frequent inspectionsand having powers to even orderindustry closure.
  • 15. Introduction Design Perspective for Governance Designing regulatory Innovation to Reduce Opportunities foThird-party auditing• Used by regulator in Gujarat to supplement government inspectors• Auditors are chosen and paid for by the firm they audit• Perverse incentives? May be cheaper to shop for auditors whofalsify readings than reduce pollution.• With the regulator, we (with Duflo, Greenstone, Ryan):experimentally remove conflict of interest and increase monitoringof environmental auditors• In and around Gujarat’s two most populous cities, in half theaudit-eligible plants1 Auditors randomly assigned to plants and paid centrally (ratherthan by plant)2 Auditors backchecked on performance after 20% of visits.
  • 16. Most Auditors in Status quo report just understandardFigure: Audit Treatment Effect in Density Bins, All Pollutants
  • 17. And this doesnt match findings fromindependent backcheckFigure: Audit Treatment Effect in Density Bins, All Pollutants
  • 18. Auditors in treatment cease to under-report andbecome unbiasedFigure: Audit Treatment Effect in Density Bins, All Pollutants
  • 19. Introduction Design Perspective for Governance Designing regulatory Innovation to Reduce Opportunities foPlants reduce pollution in responseFigure: Audit Treatment Effect on Plant Pollutant Concentrations
  • 20. Outline1 Corruption and Income: Some Stylized Facts2 Design Perspective3 Improving the Regulatory Framework: One example fromIndia4 Further Avenues
  • 21. Introduction Design Perspective for Governance Designing regulatory Innovation to Reduce Opportunities foWhere Next?• Ensuring effective governance is likely to be the most sustainablesolution to high levels of corruption• However, to identify governance solutions we need researchers toengage with policy actors at the design stage• There is a growing but still small evidence base on the costs ofcorruption and its correlates• Simply evaluating existing policies often fails to provide insights onwhat may constrain implementation of proposed solution.• Need to prioritize project design based on theory and evidence andevaluation of proposed projects before large scale propogation

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