Events at CERGE-EI

Prof. Michael Callen

London School of Economics, United Kingdom

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Abstract: Modern states have the capacity to identify their employees and pay them for their work. This paper reports evidence from a randomized evaluation of a major reform intended to improve the Afghan government's ability to perform these essential functions, which involved over 30,000 employees of the Ministry of Education between 2018 and 2020. The first element of the program, designed to eliminate "ghost" workers, required employees to register for a mobile money wallet with biometric identification. This policy change helped eliminate a substantial number of "ghosts'' from the payroll (2.8 % - 6 % of all employees), and suggests that up to 17.6 % of remaining employees are "stand-ins'' who do not actually work. The second reform transitioned employees from receiving their salary in cash to receiving it via direct mobile money transfers. This led to a 26 percentage point increase in support for the reform to be scaled nationally, and caused employees to dramatically increase activity on the mobile money network, demonstrating a potential pathway toward promoting financial inclusion. Because the experiment spanned both secure and contested regions, we can examine whether state control complemented the reform. Our results highlight the importance of long-term horizons in state-building efforts and the importance of physical security as a prerequisite for bureaucratic modernization. We find that progress is possible, even in the shadow of war and while the broader state is under threat.