Corruption in hiring for public sector jobs is common in developing countries and has been thought to have a detrimental effect on government service delivery. This paper documents the workings and consequences of corrupt hiring systems with original data from a developing country health bureaucracy. Hiring decisions are shown to be based on a first-price, winner-pay auction, and those hired paid large bribes to get their jobs, averaging 17 months of salary. To establish the consequences of corruption, I collect data on the universe of potential applicants for these jobs and determine the sets of applicants and hires under merit-based hiring procedures, such as standardized testing. Contrary to conventional wisdom, actual hires are of a high quality and are even superior to hires under on a knowledge-based test. This result has a simple economic explanation: the key determinants of bribe offers (i.e. applicant wealth and willingness to pay) are strongly positively correlated with performance in the job. I discuss how the effects of corruption in hiring are heterogeneous and depend on factors such as the extent of rent-seeking opportunities afforded by the job. Misallocation can be minimal in hiring for jobs with limited opportunities for corruption, such as teachers and health workers, but is greater for jobs such as tax collectors or police officers.

Online Theory Appendix

Coverage: VoxDev

The Effect of Parental and Sibling Incarceration: Evidence from Ohio and Pennsylvania (with Sam Norris and Matt Pecenco)

The United States incarcerates over 2 million people annually, but an even larger number of individuals are affected by the criminal justice system as family members of the incarcerated. In this paper, we provide the first quasi-experimental estimates of the effects of incarceration on prisoners' children and siblings in the United States. We leverage the random assignment of cases to judges in Ohio as a source of exogenous variation in incarceration, and use linked administrative data to measure outcomes for family members. In contrast to most existing work, we find that incarceration reduces criminal involvement among the children and siblings of prisoners. Parental incarceration decreases the likelihood of juvenile incarceration by 2.3 percentage points (45 percent) and adult incarceration by 2.6 percentage points (29 percent), with similar estimates for the effect of sibling incarceration. The reductions are concentrated among children from poorer neighborhoods and those who experience maternal rather than paternal incarceration. At the same time, parental incarceration increases rates of teen parenthood and reduces high school graduation rates. We show that these effects are most consistent with exposure to incarceration having a specific deterrent effect on child criminal activity, although the stresses associated with parental incarceration simultaneously harm children in other domains.

Improving Last-Mile Service Delivery using Phone-Based Monitoring (with Karthik Muralidharan, Paul Niehaus and Sandip Sukhtankar) [AEA registry] [NBER WP]

Improving "last mile" public-service delivery is a recurring challenge in developing countries. Could the rapid adoption of mobile phones provide a simple, cost-effective means to do so? We evaluate the impact of a phone-based monitoring system on improving the delivery of a program that transferred nearly a billion dollars to farmers in the Indian state of Telangana, using an at-scale experiment randomized across 5.7 million farmers. A randomly selected sample of officials were told that a representative sample of beneficiaries in their jurisdiction would be called to measure the quality of program implementation. This simple announcement led to a 1.5% increase in the number of farmers receiving their benefits, with a 3.3% increase among farmers in the bottom quartile of landholdings. The program was highly cost-effective, with a cost of 3.6 cents for each additional dollar delivered.

Coverage: Hindustan Times Op-ed, Financial Express

Marriage Markets and The Rise of Dowry in India (with Gaurav Chiplunkar)

Dowry payments are an important part of household finances in India, typically exceeding one to two years of household earnings. Yet there is little empirical evidence on determinants of dowry payments, with existing work relying on small and non-representative samples. In the first part of the paper, we leverage data on over 76,000 marriages to document stylised facts about changes in Indian marriage markets between 1930-2000. We show that although many marriage practices remain static over this time period, there were large changes in dowry payment. Between 1930-1975, the proportion of marriages with any dowry paid increased from 35-40% to nearly 90%. Over the same period, median real dowry more than doubled, but decreased after 1975 in real terms as well as a fraction of household income. In the second half of the paper, we use this data to test major theories of dowry: (i) whether dowry serves as a bequest to female children or is a groom price; (ii) if the increase in dowry prevalence resulted from lower castes adopting high caste practices (Sanskritization); (iii) how changes in sex ratios on the marriage market affect dowry (Marriage squeeze hypothesis); and (iv) if changes in dowry can be explained by hypergamy and cross-caste competition for grooms. We find that the patterns in the data do not support these theories, but instead that the changes are explained by shifts in the quality (earnings/education) distribution of brides and grooms. This has important implications for designing anti-dowry policies.

Coverage: Live Mint

Minimum Wage and Price Pass-through (with Sharat Ganapati)

While the vast majority of minimum wage research has focused on possible disemployment and labor market effects, this paper examines its effect on prices. Utilizing detailed transaction-level datasets, we find minimal pass-through of minimum wage changes onto retail and grocery prices. This finding is robust to a number of identification strategies, such as matching counties across state boundaries, and is precisely identified. Additionally, we do not find evidence for anticipation/retrospective adjustment in prices, heterogeneous responses based on the size of the minimum wage change, or heterogeneous effects on consumers of different income groups. Data from the Quarterly Census of Employment and Wages rationalize these findings. Since labor is a relatively small portion of total costs in this sector and the effect of the minimum wage on labor costs is modest, this leads to minimal response in prices. Estimates from other industries suggest that, aside from the restaurant and fast-food sectors, this low pass-through holds more generally.

Works in Progress

Timing of Cash Transfers and Child Health (with Karthik Muralidharan, Paul Niehaus and Sandip Sukhtankar) [AEA registry]

Designing Hiring Systems: Theory and Empirical Evidence