NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Letter Grading Government Efficiency

[There is] enormous variation in government efficiency as measured by the probability and the time of returning ... [a mis-addressed] letter.

Alberto Chong, Rafael La Porta, Florencio Lopez-de-Silanes, and Andrei Shleifer examine the operations of the postal services in 159 countries as a lens for measuring the quality of government in those nations. In an experiment, they mailed ten letters to non-existent business addresses in each of the countries and then recorded whether they came back to the return address in the United States, and how long that took. Each envelope included a return address and a request to "please return to sender." About 60 percent of the letters were returned, but on average it took over six months for that to happen.

In Letter Grading Government Efficiency (NBER Working Paper No. 18268), the authors argue that this approach to measuring government efficiency has several key advantages. First, mail is a fairly simple and universal government service. Second, neither corruption nor politics play a role in the services they evaluate, because it is impossible to ask the American sender of the letter for a bribe and no political purpose is served by either returning the letter or throwing it out. It is a simple matter of postal employees doing their job, or not doing it.

The researchers find enormous variation in government efficiency as measured by the probability and the time of returning the letter. They received all of the letters back from 21 countries, including Canada, Norway, Germany, Japan, Uruguay, Barbados, and Algeria. No letters came back from 16 countries, most of which are in Africa but also including Tajikistan, Cambodia, and Russia. According to the postal convention, to which all the countries are signatories, a country should return such letters within a month, but none met that goal. Four countries sent all of their letters back within 90 days (United States, El Salvador, Czech Republic, and Luxembourg), while 42 countries did not manage to return any in that period. Overall, only 35 percent of the letters came back within three months.

In statistical terms, these measures of government efficiency are highly correlated with per capita income and a country's human capital, similar to more standard survey measures. They are also correlated with the sophistication of postal technology in a country, professionalism of a country's bureaucracy, and more generally the quality of its management. The authors conclude that "it is ... important to recognize that not all bad government is caused by politics....perhaps even the more political aspects of poor government, such as corruption, may be a reflection of problems similar to those of the private sector, such as mismanagement ...[and] the failure of monitoring and incentive systems."

--Matt Nesvisky

The Digest is not copyrighted and may be reproduced freely with appropriate attribution of source.
 
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