Ordeal Mechanisms in Targeting: Theory and Evidence from a Field Experiment in Indonesia

52 Pages Posted: 29 Jun 2013 Last revised: 7 Oct 2015

See all articles by Vivi Alatas

Vivi Alatas

World Bank - Jakarta

Abhijit V. Banerjee

Massachusetts Institute of Technology (MIT) - Department of Economics

Rema Hanna

Harvard University - Harvard Kennedy School (HKS)

Benjamin A. Olken

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER); Harvard University - Society of Fellows

Ririn Purnamasari

World Bank

Matthew Wai-Poi

World Bank

Date Written: June 2013

Abstract

Economic theory suggests that, when designing aid programs, ordeal mechanisms that impose differential costs for rich and poor can induce self-selection and hence improve targeting ("self-targeting"). We first re-examine this theory and show that ordeal mechanisms may actually have theoretically ambiguous effects on targeting: for example, time spent applying imposes a higher monetary cost on the rich, but may impose a higher utility cost on the poor. We then examine these issues empirically by conducting a 400-village field experiment within Indonesia's Conditional Cash Transfer program. Targeting in the program is usually conducted by automatically enrolling candidates who pass an asset test. We compare whether instituting an ordeal mechanism, where villagers come to a central application site to apply and take the asset test, improves targeting over the existing automatic enrollment system. Within self-targeting villages, we find that the poor are more likely to apply, even conditional on whether they would pass the asset test. On net, self-targeting villages have a much poorer group of beneficiaries than status quo villages. However, marginally increasing the ordeal does not necessarily improve targeting: while experimentally increasing the distance to the application site reduces the number of applicants, it screens out both rich and poor in roughly equal proportions. Estimating the model structurally, we show that only one would need to increase the ordeal dramatically (e.g. tripling wait times to 9 hours or more) to induce detectable additional selection. In short, ordeal mechanisms can induce self-selection, but marginally increasing the ordeal can impose additional costs on applicants without necessarily improving targeting.

Suggested Citation

Alatas, Vivi and Banerjee, Abhijit V. and Hanna, Rema and Olken, Benjamin A. and Purnamasari, Ririn and Wai-Poi, Matthew, Ordeal Mechanisms in Targeting: Theory and Evidence from a Field Experiment in Indonesia (June 2013). NBER Working Paper No. w19127. Available at SSRN: https://ssrn.com/abstract=2287018

Vivi Alatas (Contact Author)

World Bank - Jakarta ( email )

Jakarta Stock Exchange Bldg. Tower 2, 12th Floor
Jl. Jend. Sudirman Kav. 52-53
Jakarta, 12190
Indonesia

Abhijit V. Banerjee

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
Room E52-252D
Cambridge, MA 02142
United States
617-253-8855 (Phone)
617-253-6915 (Fax)

Rema Hanna

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

Benjamin A. Olken

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
E52-391
Cambridge, MA 02142
United States
617-253-6833 (Phone)
617-253-1330 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-588-1407 (Phone)

Harvard University - Society of Fellows

Cambridge, MA 02138
United States

Ririn Purnamasari

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Matthew Wai-Poi

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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