Can e-governance reduce capture of public programmes? Experimental evidence from India’s employment guarantee scheme in Bihar

Can e-governance reduce capture of public programmes? Experimental evidence from India’s employment guarantee scheme in Bihar

Low administrative capacity and pervasive corruption constrain the performance of social insurance programs in many low-income settings. The increasing availability of e-governance, i.e., the application of information and communication technology for delivering public services,
makes it possible to design mechanisms with fewer agents intermediating the delivery process. Do such redesigns reduce leakages by reducing the number of potential bribe-takers, or worsen performance by reducing oversight on local implementing agencies?

This report evaluates the impact of a reform in the delivery of funds for a large public employment program, the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS). The reform was implemented in 69 blocks randomly selected from 12 districts of Bihar with a total rural population of 33 million. The reform reduced the set of agents involved in the wage payment process and, alongside, empowered the village-level agents by increasing their ability to directly request and process wage payments. During the seven months of the intervention, program expenditures dropped by approximately 25% in the treatment blocks as compared to the control. However, household
survey data shows similar levels of employment in treatment and control blocks. Survey data also indicates that payments to MGNREGS workers were delayed, but not cut, especially in the first four months of the intervention when numerous implementation issues arose.

Findings are consistent with reduced leakage of MGNREGS funds: the authors show that incidence of ghost beneficiaries declined in treatment blocks. They provide qualitative evidence that intermediary bureaucrats who were excluded by the fund-flow reform had previously used control over the fund flow to collect bribes, and actively opposed the new financial architecture. Finally, the reform presents a mechanism to link fund releases to reported expenditure.

The research finds that this intervention contributed to a significant decrease in the amount required by implementation agencies to achieve similar program outcomes. This result suggests that better cash management systems can achieve significant reductions in program costs.

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