Designing Incentives for Better Governance: Evidence from a Large-Scale Field Experiment in Peru

• In Event: Government Performance Information and Management

Abstract

Improving the performance of frontline service providers remains a central challenge for governments worldwide, particularly in low- and middle-income countries (LMICs) where weak state capacity and poor accountability mechanisms often hinder the effective delivery of essential public services. This study evaluates how institutional incentive designs and managerial support interventions affect public service delivery, health outcomes, and bureaucratic oversight in rural Peru.

In partnership with Peru’s Ministry of Economy and Finance and Ministry of Health, I implemented a large-scale cluster-randomized field experiment involving 539 municipalities to test two key questions: (1) Can institutional, performance-based incentives improve service delivery? (2) Do monitoring tools and managerial training enhance the effectiveness of such incentives?

The study employs a cross-randomized design across two interventions. The first intervention randomizes municipalities to receive either input-based incentives (IBI)—which reward service quantity (frequency of home visits)—or input- and outcome-based incentives (IOBI)—which additionally reward reductions in childhood anemia. These incentive schemes are institutional rather than individual, aligning with government preferences to reduce discretion and limit corruption opportunities.

The second intervention targets municipal managers with a high-touch managerial training program. It includes: (i) a customized technology solution that transforms administrative data into real-time dashboards using Looker Studio, (ii) an in-person workshop focused on performance management, and (iii) on-demand Help Desk support. This training aimed to strengthen managers’ ability to monitor frontline providers, set targets, interpret data, and act on program performance insights.

Preliminary results show that IOBI contracts improved managerial oversight and increased utilization of health services, such as vaccinations—services not explicitly incentivized—suggesting positive spillovers. However, short-term reductions in anemia prevalence remain limited, raising important questions about the relationship between incentives and ultimate health outcomes. 

This research contributes to the personnel economics of the state and responds to core topics regarding the effectiveness of performance-based incentives, the role of technology in reducing frauds, and the design of institutional mechanisms to improve civil servant accountability. The cross-randomization design uniquely enables an exploration of complementarities between incentives and monitoring, providing experimental evidence on how technology-enabled tools interact with institutional contracts to strengthen state capacity. The findings have strong policy relevance for governments in LMICs designing scalable, cost-effective reforms to improve service delivery. They also contribute to the broader academic literature on public management and health systems, offering practical insights into how managerial tools and institutional design shape frontline performance in real-world bureaucracies.

Author

• Sarita Patricia Ore, Teachers College, Columbia University
  Presenting Author