Updating the state: Information acquisition costs and social protection delivery

Abstract: Digital payment systems are frequently described as a means of expanding state capacity in lower-income countries; however, program performance gains may be weakened if digitization reduces (or leaves unchanged) program information available to overworked administrators responsible for financial oversight, or if it increases middle managers' informational advantage over the principal. To assess these concerns, we conduct an at-scale field experiment in two Indian states, varying the administrative level provided access to PayDash, a mobile-based emanagement platform that lowers program information acquisition costs. PayDash access cuts payment processing time by 11 percent, increases work days by 19 percent, and leaves program corruption unchanged. Manager and principal PayDash access had similar impacts, suggesting information gains directly improved program implementation by middle managers. A transfertracking exercise shows a 23 percent reduction in middle-manager transfers, suggesting that lowering information acquisition costs for the principal reduces her reliance on blunt incentive contracts.