We explore the impact of allowing for outsourcing service delivery to the private sector within Indonesia’s largest targeted transfer program. In a field experiment across 572 municipalities, we find that allowing for outsourcing the last mile of food delivery reduced operating costs without sacrificing quality. However, the prices citizens paid were lower only where we modified the bidding rules to encourage more bidders. Higher rents are associated with greater entry despite elites’ efforts to block reform. In this context, the option to outsource and sufficient competition generated significant benefits relative to public distribution.

Redistribution programs in developing countries often “leak” because local officials do not implement programs as the central government intends. We study one approach to reducing leakage. In an experiment in over 550 villages, we test whether mailing cards with program information to targeted beneficiaries increases the subsidy they receive from a subsidized rice program. On net, beneficiaries received 26 percent more subsidy in card villages. Ineligible households received no less, so this represents substantially lower leakage.