Policy Research Working Paper 8644 Public Disclosure Authorized Hierarchy and Information Daniel Rogger Public Disclosure Authorized Ravi Somani Public Disclosure Authorized Public Disclosure Authorized Development Economics Development Research Group November 2018 Policy Research Working Paper 8644 Abstract The information that public officials use to make decisions accuracy. The errors of public officials are large, with 49 determines the distribution of public resources and the effi- percent of officials making errors that are at least 50 percent cacy of public policy. This paper develops a measurement of objective benchmark data. The provision of briefings framework for assessing the accuracy of a set of fundamen- reduces these errors by a quarter of a standard deviation, but tal bureaucratic beliefs and provides experimental evidence in line with theoretical predictions, organizational incen- on the possibility of ‘evidence briefings’ improving that tives mediate their effectiveness. This paper is a product of the Development Research Group, Development Economics. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://www.worldbank.org/research. The authors may be contacted at [email protected]. The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent. Produced by the Research Support Team Hierarchy and Information ∗ Daniel Rogger and Ravi Somani The most recent version of this paper can be found here. Keywords: information, bureaucrats, public administration, decentralization JEL Classification: D73, D82, H00, H11, H70, H83, O20 ∗Rogger: World Bank Research Department, 1818 H St NW, DC 20433, USA, and Institute for Fiscal Studies (IFS); [email protected]. Somani: Department of Economics, University College London; [email protected]. We thank the Ministry of Public Service and Human Resource Development of the Federal Government of Ethiopia for their leadership and support throughout design, implementation and data collection. We are very grateful to Elsa Araya, Verena Fritz and Kerenssa Kay of the World Bank’s Governance Global Practice for collaboration on implementation of the survey that underlines this work. We gratefully acknowledge financial support from the Centre for the Study of African Economies [grant number CUR00090], the UK’s Department for International Development, the International Growth Centre [grant number 32407], and the World Bank’s Development Impact Evaluation i2i fund, Bureaucracy Lab and Governance Global Practice. We are grateful to Pierre Bachas, Guadalupe Bedoya, Antonio Cabrales, Aidan Coville, Stefan Dercon, Eliana La Ferrara, Arianna Legovini, David McKenzie, Macros Vera Hernandez, and seminar participants at Bocconi, George Washing- ton University, Paris School of Economics, Kent, Namur, Oxford and the UK’s Department for International Development for valuable comments. All errors remain our own. 1 Introduction The information that public officials use to make decisions determines the distribution of public resources and the efficacy of public policy (Callen et al., 2018; Dal Bó et al., 2018). Errors in that information can reduce social welfare as the marginal efficiency of public investments falls. Correspondingly, policy- related research frequently attempts to improve the information set of public officials and thereby raise the efficiency of policy.1 Despite the importance of bureaucratic beliefs for citizen welfare, there is an absence of empirical evidence on the accuracy of information used in public sector decision-making. This paper develops a measurement framework for assessing the accuracy of a set of fundamental bureaucratic beliefs and provides descriptive evidence on their determinants. We then provide experimental evidence on the possibility of improving the accuracy of those beliefs through the provision of evidence briefings, akin to those used by actors inside and outside the public service to inform public officials. More precisely, we develop a survey that extracts the beliefs of public officials about the key variables on which their work depends, such as the size of the population they are serving or sector-specific variables such as the number of primary-age children who are in school. We compare the responses of the surveyed officials to objective benchmark data from administrative and survey data to calculate the scale of errors that these officials make. We thus provide among the first large-scale descriptive evidence on the nature and correlates of information in the public sector. We combine these measures with information about the structure of the hierarchy in which public officials work and the management practices they operate under to show that our descriptive results closely mirror a series of core theoretical predictions regarding the distribution of information in the public sector. Information acquisition in bureaucratic hierarchy is theoretically distinctive to models of learning by autonomous agents. Unlike markets, bureaucracies do not have organic information creation mechanisms, such that individual officials must undertake costly actions to acquire and absorb information. As bureaucratic decision-making is based on team production and decision-making, officials face the threat of being over-ruled by their superiors and an incentive to free ride on the information acquisition of other bureaucrats (Argenziano et al., 2016; Di Pei, 2015; Stiglitz, 2017). Our empirical results closely match the predictions of this theoretical literature. 1This is an explicitly stated aim of many important economics research centres such as: the US-focused Bipartisan Policy Center’s Evidence-Based Policymaking Initiative, which provides “advice and expertise on implementation options and strategies ... as Congress develops legislation and as the Executive Branch devises regulations, policies, and standards to improve the generation of high level, quality evidence.”; the Centre for Economic Policy Research (CEPR) that “initiates, funds and coordinates research activities and communicates the results quickly and effectively to decision makers around the world.”; the Abdul Latif Jameel Poverty Action Lab (J-PAL) which is “a global research center working to reduce poverty by ensuring that policy is informed by scientific evidence.”; and the World Bank, that “generates high-quality and operationally relevant data and research to transform development policy”. 2 We enumerate our survey to a representative sample of officials across the Government of Ethiopia. Our survey spans 1,831 officers working in 382 organizations spanning all three tiers of government, and the variables on which we collect data are fundamental quantities of their work. Given the novelty of our data and the scarcity of empirical evidence on this subject, we provide a substantial amount of descriptive evidence on the nature and scale of errors in claims made by public officials of Ethiopia’s government. A minority of the public officials we study make relatively accurate claims about their constituents. Of officials’ assessments of the population they serve, 22% are within 20% of the census-defined population. However, a large proportion of bureaucrats make economically-meaningful mistakes about the basic con- ditions of local jurisdictions. 50% of officials claim that their district’s population is 50% bigger or smaller than it is. The scale of errors is similar across the distribution of district populations, implying that public officials are indeed adjusting their estimates towards the underlying state of nature, but doing so with a lot of noise. Across the socio-economic variables we study, 49% of public officials make errors that are at least 50% of the underlying benchmark data. Restricting our analysis to that set of variables that are the primary responsibility of officials, such as those questions asked to education officials about education, 62% of officials make errors that are at least 50% of the underlying benchmark data. Such large errors are consistent with studies of agents from other settings, such as farmers not optimizing important aspects of the technology they use (Hanna et al., 2014), Indian manufacturing firms having limited information on quality defects, machine downtime, and inventory (Bloom et al., 2012), and professional forecasters making large but predictable mistakes (Ehrbeck and Waldmann, 1996; Andrade and Le Bihan, 2013). These results matter because public officials state that their tacit knowledge is a key source of infor- mation in public policy decision-making. As Duflo (2017) argues, policymakers “tend to decide on [policy design details] based on hunches, without much regard for evidence.” Our survey asks where officials source their knowledge to make public policy decisions. Consistent with other studies (World