The Analytical Angle: Taking an experimental approach on civil service reform - Poverty Action Lab
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The Analytical Angle: Taking an
experimental approach on civil
service reform
There is no one-size- ts-all solution and we shouldn’t hold out hoping
to nd it.
Asim Ijaz Khwaja | Tiffany Simon ― Updated Mar 28, 2019 01:02pm
Illustration by Mushba Said.
P
akistan Tehreek-i-Insaf’s (PTI) 2018 manifesto calling for the
transformation of governance through civil service reform
unleashed a flurry of opinions on what exactly Pakistan should be
doing to fix the public sector.Commentators have offered their thoughts on the civil service’s
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outdated colonial structure, excessive reliance on generalists, lack
of tenure options, bloated size, unequal opportunities for career
advancement, low salaries and housing perks, corruption, need
for e-governance, primacy of the federal service over the
provinces and even meta-critiques on the process of reform
itself.
While many of these points are valid, the debate as it is currently
taking place risks not moving reform forward.
Related: Pakistan hasn’t succeeded in reforming its bureaucracy in the
past. Can the PTI deliver?
In order for us to truly create change in the civil service, we need
to actually test proposed policies using an approach that is
analytically sound, designed for the context and rigorously
evaluated and refined.
The good news is that this kind of analytical approach is feasible
and can work in Pakistan. We know this because our team has
spent the past decade collaborating with the government on
experiments that test ways to enhance civil servants’
performance.
One of us, Asim Khwaja, is working with coauthors Adnan Khan
(London School of Economics) and Benjamin Olken
(Massachusetts Institute of Technology), and the Excise and
Taxation Department of Punjab on a series of studies. This
collaboration has yielded insights both on how to improve the
civil service and how to approach reform more broadly.
Civil servants’ performance can be enhanced by either changing
who they are or how they behave. However, replacing civil
servants is difficult and disruptive, with no guarantee that their
replacements would be any better.
Changing how we reward them, with their pay tied to how well
they do their job, can be easier and effective. Indeed, two of our
studies in Pakistan demonstrate that offering well-designed
incentives to civil servants can significantly improve their
performance.Each study utilised a randomised controlled trial design. A
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“treatment” group was randomly selected to experience a reform
and compared to a “control” group, which continued under
“business as usual,” to accurately determine the impact of the
policy.
In depth: A look at PML-N's selective anti-corruption drive
In the first study , the research team assigned a treatment group
of tax collectors to receive a salary bonus based on their
performance.
We found that over two years, tax revenues in circles where tax
collectors were assigned to these performance pay schemes had a
46 per cent higher rate of growth in tax collection compared to
those under regular pay.
Offering performance pay as an incentive was not only effective
in improving tax collection, but it was also cost-effective: the
government’s return on investment for instituting performance
pay was 30pc. In fact, the returns could be substantially higher
since our findings suggest these effects persist over time.
In a second complementary study , the research team examined
whether non-monetary incentives can also work — specifically,
whether the promise of merit-based postings to desired locations
can motivate civil servants to improve their performance.
We found that a treatment group of tax collectors who were
allowed to choose their subsequent postings based on how well
they performed showed a 41pc higher growth rate in tax collection
relative to the control group.ABOUT SUBMIT
Tax revenue growth rate
(compared to control group)
50
45
40
35
30
25
20
15
10
5
0
Study 1: Performance Pay Incentive (all Study 2: Transfer incentive
treatments)
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While this growth rate is slightly lower than what we discovered
with monetary incentives, the non-monetary scheme had zero
additional financial costs (aside from administrative and political
costs), suggesting that it offered an even higher financial return
on investment to the government. We expound on the results in
an essay on the Evidence for Policy Design website.
What does this all mean for the immediate task of civil service
reform?
Our findings provide powerful and actionable evidence that
incentives matter. Both monetary and non-monetary methods
can incentivise performance, and they work even without hiring
or firing any civil servants.
A second, broader point is that our research shows that
experimentation is the right way to work out the specifics of
reform. In order to attain that positive effect in the first study,we tried three different bonus schemes, all of which had the
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potential to incentivise performance.
Study 1: Tax revenue growth rate
by bonus scheme (compared to
control group)
60
50
40
30
20
10
0
Revenue (bonus based on tax Revenue Plus (same as Revenue Flexible Bonus (bonus based on
collector's performance above but adjusted for taxpayer subjective review by senior
their previous threshold) satisfaction and tax assessment staff)
accuracy)
Share
We found that in our context, the simplest bonus scheme worked
best, even though it rewarded only a single dimension of
performance. This “revenue” scheme, where tax collectors were
paid a bonus directly tied to the revenue they collected, had a
62pc higher growth rate in tax collection.
The most comprehensive scheme — the “flexible bonus,” where
tax collectors received bonuses based on a range of subjective
criteria set by senior staff — was the least effective.
Although the “flexible bonus” scheme was based on a more
complete set of information, which we thought might make it a
stronger incentive, in our context, the simplest scheme worked
best.Ultimately, in order to find the best policy option, one will need to
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test a range of schemes for each specific situation.
A third point is that experimenting with different options not
only lets you identify benefits, it helps you watch out for side
effects that can harm citizens. One concern with the simple
“revenue” scheme is that only rewarding on tax collection could
lead to over-taxation or harsher treatment of taxpayers.
In order to examine whether this would happen, our study
collected information on tax assessment accuracy and taxpayer
satisfaction. The good news was that we found no adverse impact.
The troubling news was that that while some taxpayers indeed
pay higher taxes, others instead report offering higher side
payments in the new bargain made.
The point here is that collecting detailed information can help
you contour the policy for the best possible outcome for all —
including coupling rewards with penalties for undesirable
behaviour.
Read next: Is the bureaucracy politically neutral during elections?
Finally, one should track the impact of a policy reform over time
to help refine it. Findings from both our studies suggested that
incentives need not be offered every year, but instead only at key
moments for the department.
Our first study found that the increases in tax collection lasted
beyond the period of performance pay (because newly recorded
properties continued to generate revenue).
Our second study found that tax collectors who were offered
merit-based transfers two years in a row were actually less
e ective than those who only experienced it once (possibly due to
the disruption caused by frequent moves).
By understanding the nuanced effects of the policies over time,
we can increase both their impact and their cost-effectiveness.
These findings can specifically help inform civil service reform in
Pakistan, but they also speak on a broader level on how to affect
policy change. For successful reform to take place, we need tocreate an environment where multiple — and often contrasting
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— ideas can be rigorously tested, compared and refined.
While hypothetical debates may offer the opportunity to put
forward a range of policy options, we will never find resolution
through highly partisan argumentation or the endless airing of
expert opinions on talk shows.
There is no one-size-fits-all solution that will resolve all
problems facing a nation, and we shouldn’t hold out hoping to
find it. Any one study can be highly informative, but for real
change, we ultimately need many such studies.
By systematically testing policies and making a case for them
based on hard data, we can create a structure to discover the best
reforms that stick and thrive.
The Analytical Angle is a monthly column where top researchers bring
rigorous evidence to policy debates in Pakistan. The series is a
collaboration between the Centre for Economic Research in Pakistan ,
Evidence for Policy Design at Harvard Kennedy School, and Dawn.com.
The views expressed are the authors’ alone.You can also read
