Building State Capacity: Evidence from Biometric Smartcards in India

Abstract

Anti-poverty programs in developing countries are often dicult to implement; in particular, many governments lack the capacity to deliver payments securely to targeted beneciaries. We evaluate the impact of biometrically-authenticated payments infrastructure (\Smartcards") on beneciaries of employment (NREGS) and pension (SSP) programs in the Indian state of Andhra Pradesh, using a large-scale experiment that randomized the rollout of Smartcards over 158 subdistricts and 19 million people. We nd that, while incompletely implemented, the new system delivered a faster, more predictable, and less corrupt NREGS payments process without adversely aecting program access. For each of these outcomes, treatment group distributions rst-order stochastically dominated those of the control group. The investment was cost-eective, as time savings to NREGS beneciaries alone were equal to the cost of the intervention, and there was also a signicant reduction in the \leakage" of funds between the government and beneciaries in both NREGS and SSP programs. Beneciaries overwhelmingly preferred the new system for both programs. Overall, our results suggest that investing in secure payments infrastructure can signicantly enhance \state capacity" to implement welfare programs in developing countries.