Building State Capacity

Evidence from Biometric Smartcards in India

Bibliographic Data

ID23320328
AuthorsKarthik Muralidharan (0000-0001-8135-6225, Department of Economics, University of California, San Diego, 9500 Gilman Drive, La Jolla, CA 92093 (email: )), Paul Niehaus (0000-0001-5119-8270, Department of Economics, University of California, San Diego, 9500 Gilman Drive, La Jolla, CA 92093 (email: )), Sandip Sukhtankar (0000-0003-3047-8905, Department of Economics, University of Virginia, Monroe Hall, 248 McCormick Road, Charlottesville, VA 22903 (email: ))
Year2016
Volume106
Issue10
Pages2895-2929
Publication date2016-10-01
Peer ReviewedYes
Open AccessNo
TypeARTICLE
VenueAmerican Economic Review (JOURNAL)
Journal identifiersISSN: 0002-8282 • E-ISSN: 1944-7981
PublisherAmerican Economic Association (PUBLISHER • US)
DOI10.1257/aer.20141346
OpenAlexW1543347785
LanguageEN
Citations received98
References cited29

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 pen sion (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. (JEL H53, H55, I32, I38, J65)

Business · Computer security · Developing country · Economic growth · Economics · Government (linguistics) · Investment (military) · Order (exchange) · Payment · Smart card · Welfare · Computer Science · Demographic Trends and Gender Preferences · Finance · Healthcare Systems and Reforms · Microfinance and Financial Inclusion