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Government Decentralization Under Changing State Capacity: Experimental Evidence From Paraguay

Author

Listed:
  • Ernesto Dal Bó
  • Frederico Finan
  • Nicholas Y. Li
  • Laura Schechter

Abstract

Standard models of hierarchy assume that agents and middle managers are better informed than principals about how to implement a particular task. We estimate the value of the informational advantage held by supervisors (middle managers) when ministerial leadership (the principal) introduced a new monitoring technology aimed at improving the performance of agricultural extension agents (AEAs) in rural Paraguay. Our approach employs a novel experimental design that, before randomization of treatment, elicited from supervisors which AEAs they believed should be prioritized for treatment. We find that supervisors did have valuable information—they prioritized AEAs who would be more responsive to the monitoring treatment. We develop a model of monitoring under different allocation rules and rollout scales (i.e., the share of AEAs to receive treatment). We semi-parametrically estimate marginal treatment effects (MTEs) to demonstrate that the value of information and the benefits to decentralizing treatment decisions depend crucially on the sophistication of the principal and on the scale of rollout.

Suggested Citation

  • Ernesto Dal Bó & Frederico Finan & Nicholas Y. Li & Laura Schechter, 2018. "Government Decentralization Under Changing State Capacity: Experimental Evidence From Paraguay," NBER Working Papers 24879, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:24879
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    More about this item

    JEL classification:

    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
    • O22 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Project Analysis
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy

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