Systems Design: Hitting the Right Balance Between Autonomy & Control

MICHAEL BESTSTANFORD

ieGovern Impact Evaluation WorkshopIstanbul, TurkeyJanuary 27-30, 2015

: #ieGovern

Setting the Scene: Bureaucracy

HOW DO BUREAUCRATS IMPLEMENT POLICY?

BUREAUCRATS FOLLOW RULES SET BY GOVERNMENT• RULES SPECIFY HOW BUREAUCRATS

SHOULD ACT IN DIFFERENT SITUATIONS THAT MIGHT ARISE

• WHEN RULES ARE INCOMPLETE, BUREAUCRATS EXERCISE DISCRETION

Some Concrete Examples

• ENVIRONMENTAL REGULATION• RULE: “REGULATORS MUST INSPECT FACTORIES ON A

REGULAR BASIS”• DISCRETION: WHICH FACTORIES TO VISIT? IN WHAT ORDER

SHOULD VISITS BE SCHEDULED? HOW MANY INSPECTORS SHOULD VISIT EACH FACTORY?

• PROCUREMENT• RULE: “PROCURERS MUST ENSURE OPEN & COMPETITIVE

BIDDING PROCESS, AND PURCHASE HIGH QUALITY GOODS AT LOW PRICES”

• DISCRETION: HOW TO SPECIFY QUALITY IN TENDER DOCUMENTS? HOW TO ENSURE MAXIMUM PARTICIPATION IN BIDDING?

• TAXATION• RULE: “OFFICIALS MUST ENSURE TIMELY AND ACCURATE

TAX PAYMENT”• DISCRETION: WHO TO AUDIT? WHAT INFORMATION TO

REQUIRE ON TAX RETURNS? HOW TO FACILITATE/EDUCATE TAXPAYERS?

Incorporating Rules vs Discretion into policy IEs 1: RegulationDUFLO, GREENSTONE, PANDE & RYAN (2014)

SETTING: GUJARAT, INDIA. LIMITED CAPACITY -> 44% OF PLANTS ARE INSPECTED BY REGULATORS. RULE SAYS 100%

POLICY PROBLEM: SHOULD GOVERNMENT INVEST IN CAPACITY TO ENFORCE RULE?

IE: 960 INDUSTRIAL PLANTS. 480 RANDOMLY ASSIGNED TO RECEIVE 100% INSPECTION. 480 REMAIN IN STATUS QUO.

RESEARCH QUESTION: DO ADDITIONAL INSPECTIONS REDUCE POLLUTION?

Incorporating Rules vs Discretion into policy IEs 1: RegulationDUFLO, GREENSTONE, PANDE & RYAN (2014)

RESULT 1: MORE INSPECTIONS, MORE CITATIONS:

-> POLICY WORKS. BUT…

Incorporating Rules vs Discretion into policy IEs 1: RegulationDUFLO, GREENSTONE, PANDE & RYAN (2014)

RESULT 2: ADDITIONAL INSPECTIONS HAVE LITTLE IMPACT ON POLLUTION!

WHY? REGULATORS EXERCISED DISCRETION TO TARGET SCARCE INSPECTION RESOURCES TO WORST POLLUTERS

-> 100% RULE = OVER-INSPECTION

Incorporating Rules vs Discretion into policy IEs 2: ProcurementBANDIERA, BEST, KHAN & PRAT (201X)

SETTING: PUNJAB, PAKISTAN. “AIM OF PROCUREMENT IS THAT IT BRINGS VALUE FOR MONEY TO THE AGENCY AND THE PROCUREMENT PROCESS IS EFFICIENT & ECONOMICAL”(PUNJAB PROCUREMENT REGULATORY ACT 2009)

POLICY PROBLEM 1: HOW TO MEASURE VALUE FOR MONEY?

POLICY PROBLEM 2: HOW TO IMPROVE VALUE FOR MONEY?

Incorporating Rules vs Discretion into policy IEs 2: ProcurementBANDIERA, BEST, KHAN & PRAT (201X)

POLICY SOLUTION 1:• FOCUS ON“GENERIC”GOODS• ADJUST PRICES FOR QUALITY, CONTRACT

CHARACTERISTICS, BULK DISCOUNTS ETC.• COMPARE ADJUSTED PRICES ACROSS PUBLIC

BODIES

-> PRICES PAID BY DIFFERENT PUBLIC BODIES FOR THE SAME GOOD AS INDICATOR OF VALUE FOR MONEY.

-> ADJUSTED PRICES VARY WIDELY ACROSS PUBLIC BODIES

Incorporating Rules vs Discretion into policy IEs 2: ProcurementBANDIERA, BEST, KHAN & PRAT (201X)

POTENTIAL POLICY SOLUTION 2 (A):• PAY FOR PERFORMANCE TREATMENT

• PUBLIC BODIES RANKED ON VALUE FOR MONEY.

• TOP 25 PERFORMERS RECEIVE 2 MONTHS SALARY BONUS: “GOLD GROUP”

• NEXT 50 PERFORMERS RECEIVE 1 MONTH SALARY BONUS: “SILVER GROUP”

• NEXT 75 PERFORMERS RECEIVE ½ MONTH SALARY BONUS: “BRONZE GROUP”

Incorporating Rules vs Discretion into policy IEs 2: ProcurementBANDIERA, BEST, KHAN & PRAT (201X)

POTENTIAL POLICY SOLUTION 2 (B):• DISCRETION TREATMENT

• BUDGET RELEASED IN 2 TRANCHES & ON TIME. (PLANNING FLEXIBILITY)

• CASH ON HAND INCREASED (MAKE IMMEDIATE CASH PAYMENTS TO VENDORS)

• PRE-AUDIT APPROVALS STREAMLINED (REDUCE DELAY BETWEEN INVOICE AND PAYMENT)

Incorporating Rules vs Discretion into policy IEs 2: ProcurementBANDIERA, BEST, KHAN & PRAT (201X)

IMPACT EVALUATION:• 618 PUBLIC BODIES IN AGRICULTURE,

HIGHER EDUCATION, WORKS & HEALTH DEPARTMENTS RANDOMLY ASSIGNED TO 1 OF 4 GROUPS

1. PAY FOR PERFORMANCE (150 PBS)2. DISCRETION (157 PBS)3. PAY FOR PERFORMANCE & DISCRETION (159

PBS)4. STATUS QUO [CONTROL] (152 PBS)

PRELIMINARY RESULTS IN AUGUST 2015…