E-governance, Accountability, and Leakage in Public Programs: Experimental Evidence from a Financial Management Reform in India

Can e-governance reforms that reduce advance funds available to local administrators enhance accountability and reduce the leakage of public funds? We investigate this question via a large field experiment and the nationwide scale-up of a financial reform to India’s employment guarantee program. The reform replaced advance payments, authorized by intermediate administrative tiers, with direct invoicing and payments to local bodies. We find that corruption declined: program expenditures dropped by 24%, while an independent survey found no decline in actual program outcomes; matching the program database with a household census reveals a 5% reduction in ghost beneficiaries; and program officials’ personal wealth fell by 10%. Consistent with the experimental findings, the nationwide scale-up resulted in a persistent 19% reduction in program expenditure. However, the ending of advance payments did come with a cost – increased payment delays. ∗We thank Abhishek Anand, Madeline Duhon, Pooja Khosla, Shweta Rajwade, M.R. Sharan, Niki Shrestha and Pankaj Verma for excellent research assistance. We thank the International Initiative for Impact Evaluation (3ie) and the International Growth Centre (IGC) for financial support. We thank Julien Labonne, Eliana la Ferrara, Rema Hanna, Ben Olken, Debraj Ray, and Sandip Sukhtankar for helpful comments. As the principal secretary of Bihar’s Department of Rural Development, Santhosh Mathew was involved in the design of this reform and early implementation efforts. However, all views and errors are solely ours and this paper does not represent the view of the Ministry of Rural Development or any part of the Government of India. The project was approved by the Institutional Review Boards at Harvard, IFMR, and MIT (COUHES Protocol 1207005145). This study is registered in the AEA RCT Registry and the unique identifying number is AEARCTR-0000009. †MIT, [email protected] ‡MIT, [email protected] §Warwick, [email protected] ¶Ministry of Human Resource Development, Government of India [email protected] ‖Harvard, [email protected]