On the difficulty of implementing right-to-work legislation

The chronically poor have a low labor-market attachment, to a large extend because of a lack of skills and experience. This is thus a vicious circle. One way to break this vicious circle is to offer them employment and hope this turns into a virtuous circle. This is what India implemented in 2005, a program that guarantees any rural adult 100 works days on public projects at minimum wage (thereby getting the richer people to self-select out). Does the theory work out in practice?

Puja Dutta, Rinku Murgai, Martin Ravallion and Dominique van de Walle report that it worked, sort of. The poorest families do indeed use the scheme most, but here remains unmet demand, thus the state was not able to fulfill its work guarantee. In fact, this rationing was most prevalent in the poorest Indian states, where the guarantee is the most needed, and where the resulting public works would also be of the highest benefit. And while the scheme seems to motivate more rural women to participate in the labor market, the rationing still privileges men. All in all, the program seems to roughly target the right people, although there is substantial scope for improvement. But we still need to wait for more data to see whether it works to alleviate chronic poverty.

How to fight corruption

Conventional wisdom tells us corruption is bad (except for a few people). The evidence is surprisingly mixed (see old post), but that has not deterred every government or international agency to at least pretend to do something about it. Eradicating or attenuating corruption rarely works, maybe it is because the approach is wrong.

Martin Dufwenberg and Giancarlo Spagnolo verify an innovative angle to attack bribing, as proposed by Kaushik Basu and widely discussed in the Indian press: make bribing legal, but levy heavy fines on accepting bribes. That is somehow similar to the situation in some countries where consuming some drugs is legal, but their commerce is not. The conundrum the proposal tries to resolve is that briber and bribe-taker are usually partners in crime and unlikely to report the activity. By guaranteeing immunity to one party with return of the bribe, it is more likely that the corruptive transaction will be reported. But it turns out to optimize it, immunity should only be granted to those who report a bribe. Indeed, this gives stronger incentives to report. Also, granting immunity to any briber would have made it morally acceptable to bribe. To this I would have added that one also offer the repented briber a commission on top of the returned bribe. Then it would become profitable to report bribes, even when the requested service is ultimately not provided.