Special Lecture 3

In this session, Karthik Muralidharan (UCSE, NBER, and J-PAL) first presented the paper “Building state capacity: evidence for biometric smartcards in India”. This study seeks to address the issue of leakage in anti-poverty programs by using biometric data of beneficiaries across 158 subdistricts. Biometric authentication has gained momentum internationally as a mechanism to reduce leakage. A key challenge in the implementation of anti-poverty programs in India is the limited capacity to securely transfer payments to targeted beneficiaries. The implementation of the smartcards benefited from experience and top-level support, but still faced several challenges. The results indicate better NREGS program performance on many dimensions, including a significant reduction in time to collect payment, payment lags, and payment unpredictability. Moreover, biometrics was key to reducing leakage from 30.7% to 19.9%, with households receiving 24% more NREGS income, with no increase in official outlays. Furthermore, a household at a given percentile of the outcome distribution in the treatment areas was at least as well off as a corresponding household in the control area. This means that apart for the benefits at the aggregate levels, families would not be harmed by this policy.

Mr. Muralidharan also presented his research on policy analysis by revealed preference. Given the issues of the Target Public Distribution System (TPDS), a number of policymakers have suggested a case for switching to cash transfers. Taking into account the fact that governments are risk-averse about big changes, the key innovation in the design was to provide beneficiaries with a choice of cash/kind (to randomly chosen households). This allows looking at beneficiary preferences, study the impact on food consumption and nutrition, and estimate beneficiary valuation of the public money being spent on their name. After 3.5 years working on this project, the option of cash transfers in the TPDS has proved extremely popular among beneficiaries in Gaya District. On average, households exchanged 82% of their rice and wheat coupons for cash, and exchanged 43% of their kerosene coupons for cash. Moreover, price experiments showed that beneficiaries are willing to exchange their TPDS coupons for cash at prices that are considerably lower than market value. The Government of Bihar continues to be highly supportive of the project and has assured full support in continuing the project with tweaks needed to account for the new system.

The discussion stressed the importance of designing research-based policy. Designing and researching the right questions would always be better and compensates for the costs, compared to implementing policies without sufficient analysis risking lack of positive impact. Dr. Anjan Mukherji, Country Director from IGC Bihar, gave the final words, thanking everybody for their presence and the quality of the presentations, and for making this conference possible and successful.

By Michelle Tejada, Hub Economist, IGC Hub