Third-Party Performance Pay to Improve Local Governance: A Field Experiment

• In Event: Elections, Accountability, and Representation

Abstract

Can local government accountability be improved by giving community-based organizations a financial stake in their local government’s performance? In a field experiment in Burkina Faso, we test a "third-party performance pay" scheme for community-based organizations (CBOs). Selected CBOs are promised a variable cash grant that is proportional to changes in their local government’s performance scores over a two-year period. Partner CBOs could decide on their own if they wanted to take any initiative towards increasing their municipal government’s performance and how they would do so. They would remain eligible for the cash grant, even if they did nothing at all.

We test if third-party performance pay (1) motivates CBOs to actively lobby for better municipal performance, (2) increases accountability and problem-awareness of municipal decision makers and (3) ultimately leads to improvements in municipal government performance. We also investigate if the incentive scheme had any unintended consequences for the internal functioning of the beneficiary CBOs.

To minimize experimenter bias and improve research transparency, we conducted a fully results-blind analysis. The results-blind analysis framework enabled us select hypothesis tests, data processing and estimation strategies with knowledge of the data, but without knowledge of the actual results. Furthermore, we incorporated results-blind expert feedback from seminar presentations and recorded participants’ expectations about the eventual, unblinded results via a prediction survey.

Upon unblinding of the study, we find that third-party performance pay (3PPP) was effective at stimulating the voluntary involvement of community-based organizations in municipal governance and increased overall municipal performance scores by an estimated 0.22 standard deviations. CBOs in the treatment group significantly increased the scope of their participation in municipal governance, while municipal decision-makers report greater familiarity and interaction with the treatment CBOs, compared to control CBOs. Treatment CBOs also interacted more frequently with local service providers. At the same time, we find no evidence of adverse effects on the internal functioning of treatment CBOs. Contrary to expectations, however, we find no evidence that 3PPP increased municipal decision-makers’s perception of accountability pressures. We attribute this to the possibility that 3PPP many CBOs chose constructive forms of involvement, such as gentle nudging and collaborative problem-solving with municipal authorities, rather than more confrontational demands for accountability.

In sum, our experiment demonstrates that third-party performance pay can be an effective and beneficial method of incentivizing grassroots civil society involvement in local governance, in a way that respects community organizations' autonomy and builds on their existing local knowledge and social influence.

Authors

• Malte Lierl, German Institute of Global and Area Studies

• Marcus Holmlund, The World Bank