Can E-Governance Reduce Capture of Public Programmes? Experimental Evidence from India’s Employment Guarantee Scheme in Bihar

Traditionally, fund flow to local bodies responsible for implementing social programs is based on intended expenditure ratified by higher levels of administration. This paper reports on a field experiment which evaluated an e-governance reform of the fund-flow system for the workfare program in the Indian state of Bihar. The reform changed the traditional fund flow practice by instead conditioning fund disbursement for wage payments on incurred expenditure as reflected in worker detail entry on a new electronic platform. This reform reduced the number of administrative tiers associated with wage disbursement and changed the informational requirements for requesting and disbursing program funds. We find that program expenditure and reported employment declined by 25%, but with no discernible impact on actual employment as measured by independent surveys. Our results suggest that e-governance can reduce leakages of public funds but may not by itself improve public service delivery.