Identity Verification Standards in Welfare Programs : Experimental Evidence from India

How should recipients of publicly-provided goods and services prove their identity in order to access these benefits? The core design challenge is managing the tradeoff between Type-II errors of inclusion (including corruption) against Type-I errors of exclusion whereby legitimate beneficiaries are denied benefits. We use a large-scale experiment randomized across 15 million beneficiaries to evaluate the effects of more stringent ID requirements based on biometric authentication on the delivery of India's largest social protection program (subsidized food) in the state of Jharkhand. By itself, requiring biometric authentication to transact did not reduce leakage, slightly increased transaction costs for the average beneficiary, and reduced benefits received by the subset of beneficiaries who had not previously registered an ID by 10.6%. An event study of subsequent reforms that made use of authenticated transaction data to determine allocations to the program shows that these coincided with large reductions in leakage, but also significant reductions in benefits received. Our results highlight that attempts to reduce corruption in welfare programs by making ID requirements more stringent can also generate non-trivial costs in terms of exclusion and inconvenience to genuine beneficiaries.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at "http://www.nber.org/papers/w26744"