Ben Olken - MIT
Privatization at the Bottom of the Pyramid: Experimental Evidence on Subsidized Food Distribution in Indonesian Villages (with Banerjee, Hanna, Kyle, and Sumarto)
Date: 09/30/2015 (Wed)
Time: 3:15pm- 4:45pm
Location: Seminar will be held on-site: Social Sciences 111
Organizer: Duncan Thomas
Meeting Schedule: (Not currently open for scheduling. Please contact the seminar organizer listed above.)
All meetings will be held in the same location as the seminar unless otherwise noted.
- (All meetings will be in SS 221A, Seth Sanders' office.)
11:30am - Xiao Yu Wang
12:00pm - Lunch w/Kate Vyborny, Robert Gonzalez, Maria Laurito, Veronica Montalva, Gina Turrini, Jose Martinez
1:00pm - Xiaoxue Zhao
1:30pm - Marcos Rangel
2:00pm - Rob Garlick
2:30pm - Duncan Thomas
3:15pm - Seminar Presentation (3:15pm to 4:45pm)
5:15pm - Dinner w/ Duncan Thomas, Rob Garlick, Manoj Mohanan, Xiao Yu Wang, Erica Field, Elizabeth Frankenberg and Eddy Malesky
7:30pm - Depart for airport
Additional Comments: Abstract: In many developing countries, local governments organize the distribution of central government transfers within their locality. We analyze the effects of a large-scale, randomized field experiment across 550 Indonesian villages in which a procurement process was introduced that allowed private citizens to bid for the right to implement a subsidized rice distribution program instead of the local government. On net, this led about 25 percent of villages to switch distributors. Applicants who proposed lower prices and applicants who had relevant experience as traders were more likely to win. Conversely, villages were more likely to retain the status quo distributor when the initial price charged was low. Comparing treatment to control villages shows that in treatment villages, the markup paid by households fell by 8 percent. Households reported that the quality of the rice also significantly improved. Mandating higher levels of competition further improved outcomes: introducing a minimum number of bids requirement in a random subset of villages with the procurement process increased the number of applicants who placed a bid and led to a larger reduction in the markups than villages without this requirement. We also compare the outcomes in the villages with the bidding mechanism to a random subset of control villages in which local governments provided the same information about the program functioning that they also revealed during the procurement process. We find no effect on price or quality in these villages, implying that the observed effect from the bidding process came from competition and privatization, and not increased transparency. On net, the results suggest that privatization has the potential to improve performance, even at the village level.