NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Government Decentralization Under Changing State Capacity: Experimental Evidence From Paraguay

Ernesto Dal Bó, Frederico Finan, Nicholas Y. Li, Laura Schechter

NBER Working Paper No. 24879
Issued in August 2018, Revised in July 2019
NBER Program(s):Development Economics Program, Labor Studies Program, Public Economics Program, Political Economy Program

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 elicited treatment-priority rankings from supervisors before randomization of 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 roll-out 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 roll-out.

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Document Object Identifier (DOI): 10.3386/w24879

 
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