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  5. Building State Capacity: Evidence from Biometric Smartcards in India

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Building State Capacity: Evidence from Biometric Smartcards in India

  • Karthik Muralidharan
  • Paul Niehaus
  • Sandip Sukhtankar
American Economic Review
vol. 106, no. 10, October 2016
(pp. 2895–2929)
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Abstract

Antipoverty 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 157 subdistricts and 19 million people. We find that, while incompletely 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 in both NREGS and SSP programs. Beneficiaries overwhelmingly preferred the new system for both programs. Overall, our results suggest that investing in secure payments infrastructure can significantly enhance 'state capacity' to implement welfare programs in developing countries.

Citation

Muralidharan, Karthik, Paul Niehaus, and Sandip Sukhtankar. 2016. "Building State Capacity: Evidence from Biometric Smartcards in India." American Economic Review, 106 (10): 2895–2929. DOI: 10.1257/aer.20141346

Additional Materials

JEL Classification

  • H53 National Government Expenditures and Welfare Programs
  • H55 Social Security and Public Pensions
  • I32 Measurement and Analysis of Poverty
  • I38 Welfare, Well-Being, and Poverty: Government Programs; Provision and Effects of Welfare Programs
  • J65 Unemployment Insurance; Severance Pay; Plant Closings