nep-ppm New Economics Papers
on Project, Program and Portfolio Management
Issue of 2019‒05‒06
three papers chosen by
Arvi Kuura
Tartu Ülikool

  1. Skill versus Voice in Local Development By Casey, Katherine; Glennerster, Rachel; Miguel, Edward; Voors, Maarten
  2. Renegotiations and corruption in infrastructure: The Odebrecht case By Nicolas Campos; Eduardo Engel; Ronald D. Fischer; Alexander Galetovic
  3. Workfare programs and their delivery system effectiveness of construyendo Perú By Escudero, Verónica.

  1. By: Casey, Katherine (Stanford Graduate School of Business and NBER); Glennerster, Rachel (Department for International Development); Miguel, Edward (U of California, Berkeley and NBER); Voors, Maarten (Wageningen U)
    Abstract: Where the state is weak, traditional authorities often control the local provision of land, justice, and public goods. These authorities are criticized for ruling in an undemocratic and unaccountable fashion, and are typically quite old and poorly educated relative to younger cohorts who have benefited from recent schooling expansions. We experimentally evaluate two solutions to these problems in rural Sierra Leone: an expensive long-term intervention to make local institutions more inclusive; and a low-cost test to rapidly identify skilled technocrats and delegate project management to them. In a real-world competition for local infrastructure grants, we find that in the status quo and institutional reform arms, traditional authorities do not delegate to skilled individuals despite the clear benefits of doing so. A public nudge successfully encourages delegation, leading to an average gain of one standard deviation unit in competition outcomes. The results uncover a broader failure of traditional autocratic institutions to fully exploit the human capital present in their communities. We compare these findings to the prior beliefs of experts on likely impacts, and discuss implications for competing views on the sustainability of foreign aid.
    JEL: H41 I25 O15
    Date: 2019–01
  2. By: Nicolas Campos (Espacio Público); Eduardo Engel (Department of Economics, University of Chile); Ronald D. Fischer (Department of Industrial Engineering, University of Chile); Alexander Galetovic (Universidad de los Andes (Santiago) and Hoover Institution and Research Associate, CRIEP)
    Abstract: In 2016, Brazilian construction firm Odebrecht was fined $2.6 billion by the US Department of Justice (DOJ). According to the plea agreement, between 2001 and 2016 Odebrecht paid $788 million in bribes in 10 Latin American and two African countries in more than 100 large projects. The DOJ estimated that bribe payments increased Odebrecht’s profits by $2.4 billion. Judicial documents and press reports on the Odebrecht case reveal detailed information on the workings of corruption in the infrastructure sector. Based on these sources we establish five facts. First, for projects where Odebrecht paid bribes, renegotiations amounted to 71.3 percent of initial investment estimates, compared with 6.5 percent for projects where Odebrecht paid no bribes. Second, Odebrecht’s bribes were of the order of one percent of a project’s final investment. Third, the profits Odebrecht obtained from bribes as well as its overall profits were small, somewhere between 1 and 4 percent of its sales. Fourth, the creation of the Division of Structured Operations (DSO) by Odebrecht in 2006 led to major reductions in the firm’s costs of paying bribes and recipients’ costs of hiding the illegal proceeds. Fifth, following the creation of the DSO, Odebrecht’s sales increased more than three-fold while its profits remained small. We build a model where firms compete for a project, anticipating a bilateral renegotiation at which their bargaining power is larger if they pay a bribe. Conditional on paying a bribe and cost dispersion among firms being small, firms’ profits are small in equilibrium. When one firm unilaterally innovates by reducing the cost of paying bribes, its market share increases substantially while profits, which are proportional both to the cost advantage and to the magnitude of bribes, remain small. A parametrization with the DOJ’s data suggests that Odebrecht enjoyed a substantial cost advantage in bribing, of the order of 70 percent.
    Keywords: Corruption, infrastructure, bribes, auctions, renegotiations, lowballing, fundamental transformation
    JEL: H54 H57 K42
    Date: 2019–04
  3. By: Escudero, Verónica.
    Abstract: This paper estimates the medium- to long-term effects of the workfare program Construyendo Perú, implemented in Peru from 2007 to 2011, to support unemployed populations in situations of poverty and extreme poverty. The paper finds that the intervention helped raise employment and reduce inactivity for certain groups of beneficiaries but at the cost of locking participants in lower quality jobs (i.e. informal and paid below the poverty line). Particularly, the program was not able to improve the perspectives of lower-educated participants in terms of job quality (although it was in terms of employment) and exacerbated the job quality perspectives of women, men, and higher-educated individuals. In terms of the mechanisms, it appears that the shift from infrastructure- to service-sector-related projects during the last two years—which were less costly, of shorter duration, and had no training component—exacerbated the effects of the program. The evaluation is carried out through a regression discontinuity approach, which exploits for the first time an interesting assignment rule of the program at the district level, namely, only districts above a certain level of poverty and development shortcomings were eligible to participate.
    Date: 2018

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