Which incentives work? An experimental analysis of incentives for trainers

One conjecture in the theory of incentives is that incentives based on broader outcomes may be better at motivating agents than incentives based on narrow measures. We designed an experiment to test these hypotheses using a ""prospective randomized evaluation procedure"" (PREP). We then apply PREP to training programs as typically funded by donors of economic development assistance. We randomly assigned 274 participating entrepreneurs in the Philippines to one of 26, simultaneous, one-day, training classes in marketing. Trainers were given cash incentives based on the average score of their ""students"" on a standardized test containing an alternative number of questions, which were randomly assigned to each class. We then examined outcomes based on student satisfaction ratings of the trainer. Our results suggest that incentives based on broad outcomes are more effective than incentives based on narrow outcomes. We conclude with ways to improve our approach as well as with a discussion of the implications for using prospective randomized evaluation for improving the evaluation of donor projects.randomized trials, project evaluation, teacher incentives, aid effectiveness

The Gains from Privatization in Transition Economies: Is "Change of Ownership" Enough?

This paper seeks to clarify what factors contributed to the macroeconomic gains and losses from privatization in transition economies over the past decade. In contrast to the original "Washington Consensus," which had a tendency to equate change-of-title with privatization, we find that economic performance gains come only from "deep" privatization, that is, when change-of-title reforms occur once key institutional and "agency"-related reforms have exceeded certain threshold levels. We also find that as a result of different initial conditions the economic performance responses of countries to the same policies are different. Copyright 2002, International Monetary Fund

Patterns and Determinants of Economic Reform in Transition Economies: 1990-1998

The paper begins by presenting a framework for evaluating transition. The framework identifies categories of influences or "determinants of transition" and how they interact to produce short-term impacts, intermediate outcomes, and long-term socio-economic performance. Among the determinants are the so-called "initial conditions" of transition. The initial conditions describe the situation a country finds itself at the start of the process and are a mixture of geographic fixed characteristics, hard-to-change institutional and economic conditions, and relatively easy-to-change policy conditions. The paper then uses the initial conditions to create a country cluster typology, which is used throughout the rest of the paper. Focusing on the "cluster" as the central unit of analysis underscores our belief that this method greatly simplifies the analysis while at the same time illuminating common features that would otherwise be obscured by country-specific details. This approach also recognizes that the inter-cluster differences are so profound as to make it senseless to compare, say capital market developments in Poland with the Kyrgyz Republic; their initial conditions are just too different. While it is difficult to draw lessons between countries in different clusters, the opposite is true within clusters. By specifically controlling for common initial conditions among countries within a cluster we find ourselves with a powerful assessment tool to evaluate the effectiveness of the alternative policies that countries have taken within the cluster. In brief, a cluster based analysis is a more productive approach upon which to formulate donor programs

Detecting collusion in timber auctions : an application to Romania

Romania was one of the first transition countries in Europe to introduce auctions for allocating standing timber (stumpage) in public forests. In comparison with the former system in the country-administrative allocation at set prices-timber auctions offer several potential advantages: greater revenue generation for the government, a higher probability that tracts will be allocated to the firms that value them most highly, and stronger incentives for technological change within industry and efficiency gains in the public sector. Competition is the key to realizing these advantages. Unfortunately, collusion among bidders often limits competition in timber auctions, including in well-established market economies such as the United States. The result is that tracts sell below their fair market value, which undermines the advantages of auctions. This paper examines the Romanian auction system, with a focus on the use of econometric methods to detect collusion. It begins by describing the historical development of the system and the principal steps in the auction process. It then discusses the qualitative impacts of various economic and institutional factors, including collusion, on winning bids in different regions of the country. This discussion draws on information from a combination of sources, including unstructured interviews conducted with government officials and company representatives during 2003. Next, the paper summarizes key findings from the broader research literature on auctions, with an emphasis on empirical studies that have developed econometric methods for detecting collusion. It then presents an application of such methods to timber auction data from two forest directorates in Romania, Neamt and Suceava. This application confirms that data from Romanian timber auctions can be used to determine the likelihood of collusion, and it suggests that collusion reduced winning bids in Suceava in 2002 and perhaps also in Neamt. The paper concludes with a discussion of actions that the government can take to reduce the incidence of collusion and minimize its impact on auction outcomes.Forestry,Wildlife Resources,Markets and Market Access,Access to Markets,Technology Industry

Introducción de un Enfoque sobre la Reforma del Entorno de Negocios en Presencia de una Economía Informal

Introduction of an approach to the reform of the business settin