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India’s biometric unique ID Aadhaar has been at the forefront of the global revolution in digital identification, and India’s most significant investment in state capacity over the past decade. Yet, its application to social protection programs has been controversial. Proponents claim that the use of Aadhaar to identify and authenticate beneficiaries in these programs has led to considerable fiscal savings, while critics claim that it has led to denial of benefits to the marginalized and caused substantial harm. We review research on the use and impact of Aadhaar in social programs in India over the last decade. Our main takeaway from the review is that biometric authentication has reduced leakage in multiple settings, but its impact on beneficiaries depends crucially on the protocols and details of implementation. We conclude with a list of policy suggestions for obtaining the benefits of Aadhaar while minimizing the risk of harm to beneficiaries.

Households in developing countries often face variation in the prices of consumption goods. We develop a model demonstrating that in-kind transfers will provide insurance benefits against price risk if the covariance between the marginal utility of income and price is positive. Using calorie shortfalls as a proxy for marginal utility, we find that this condition holds for low-income Indian households. Expansions in India's flagship in-kind food transfer program not only increase caloric intake but also reduce caloric sensitivity to prices. Our results contribute to ongoing debates about the optimal form of social protection programs. (JEL D12, H53, I18, I38, O12, O15) [ABSTRACT FROM AUTHOR]

Optimal fiscal policy depends on the marginal benefits of public spending. In developing countries corrupt officials often embezzle funds, so optimal policy should reflect marginal corruption. We analyze marginal corruption in the context of a statutory wage increase in India's employment guarantee scheme. Strikingly, workers received none of the increase even though initially they were on average overpaid. The data are inconsistent with theories of \voice" in which the threat of complaints limits corruption, but consistent with “greasing the wheels" theories in which (a) corruption undoes price interventions and (b) the market bounds how much rent officials can extract.

Theoretical work on disciplining corrupt agents has emphasized the role of promised future rents (e.g. efficiency wages) but not of illicit future rents. Yet when opportunities for future rent extraction increase, agents should extract less rent today in order to preserve those opportunities. We study this “golden goose" effect in the context of a statutory wage increase in India's employment guarantee scheme, comparing official micro-records to original household survey data to measure corruption. We estimate large golden goose effects that reduced the total impact of the wage increase on theft by roughly 64%.

Antipoverty programs in developing countries are often difficult to implement; in particular, many governments lack the capacity to deliver payments securely to targeted beneficiaries. We evaluate the impact of biometrically authenticated payments infrastructure ('Smartcards') on beneficiaries of employment (NREGS) and pen sion (SSP) programs in the Indian state of Andhra Pradesh, using a large-scale experiment that randomized the rollout of Smartcards over 157 subdistricts and 19 million people. We find that, while incompletely implemented, the new system delivered a faster, more predictable, and less corrupt NREGS payments process without adversely affecting program access. For each of these outcomes, treatment group distributions first-order stochastically dominated those of the control group. The investment was cost-effective, as time savings to NREGS beneficiaries alone were equal to the cost of the intervention, and there was also a significant reduction in the 'leakage' of funds between the government and beneficiaries in both NREGS and SSP programs. Beneficiaries overwhelmingly preferred the new system for both programs. Overall, our results suggest that investing in secure payments infrastructure can significantly enhance 'state capacity' to implement welfare programs in developing countries. (JEL H53, H55, I32, I38, J65) [ABSTRACT FROM AUTHOR]