Jishnu Das of Georgetown University reviews “Accelerating India’s Development: A State-Led Roadmap for Effective Governance” by Karthik Muralidharan. The Econlit abstract of this book begins: “Explores ways of improving the functioning of Indian governance and accelerating its development, focusing on state-level governance and the delivery of public services.”

In 2005 an earthquake in northern Pakistan led to a significant inflow of international relief groups. Four years later, trust in Europeans and Americans was markedly higher among those exposed to the earthquake and the relief that followed. These differences reflect the greater provision of foreign aid and foreigner presence in affected villages rather than preexisting population differences or a general impact of disasters on trust. We thus demonstrate large-scale, durable attitudinal change in a representative Muslim population. Trust in Westerners among Muslims is malleable and not a deeply rooted function of preferences or global (as opposed to local) policy and actions.

We study the impact of providing school report cards with test scores on subsequent test scores, prices, and enrollment in markets with multiple public and private providers. A randomly selected half of our sample villages (markets) received report cards. This increased test scores by 0.11 standard deviations, decreased private school fees by 17 percent, and increased primary enrollment by 4.5 percent. Heterogeneity in the treatment impact by initial school test scores is consistent with canonical models of asymmetric information. Information provision facilitates better comparisons across providers, and improves market efficiency and child welfare through higher test scores, higher enrollment, and lower fees.

Using unique data from Pakistan, we estimate a model of demand for differentiated products in 112 rural education markets with significant choice among public and private schools. Families are willing to pay substantially for reductions in distance to school, but, in contrast, price elasticities are low. Using the demand estimates, we show that the existence of a low-fee private school market is of great value for households in our sample, reaching 2% to 7% of annual per capita expenditure for those choosing private schools.

We estimate and validate test score–based measures of school quality (school value added, or SVA) in Pakistan. We document substantial variation in SVA within villages and within the public and private sectors, leading to a wide range of possible estimates of the private premium. We also show that parents value SVA. Heterogeneity in parental demand for quality helps explain both the evolution of the market over time and cross-market variation in school quality. The supply side responds to parental demand for quality in the private sector, but there is no evidence it does so in the public sector.

We assess whether financing can help private schools, which now account for one-third of primary school enrollment in low- and middle-income countries. Our experiment allocated unconditional cash grants to either one (L) or all (H) private schools in a village. In both arms, enrollment and revenues increased, leading to above-market returns. However, test scores increased only in H schools, accompanied by higher fees, and a greater focus on teachers. We provide a model demonstrating that market forces can provide endogenous incentives to increase quality and increased financial saturation can be used to leverage competition, generating socially desirable outcomes.

We estimate the equilibrium effects of a public school grant program administered through school councils in Pakistani villages with multiple public and private schools and clearly defined catchment boundaries. The program was randomized at the village level, allowing us to estimate its causal impact on the market. Four years after the start of the program, test scores were 0.2 standard deviations higher in public schools. We find evidence of an education multiplier: test scores in private schools were also 0.2 standard deviations higher in treated markets. Consistent with standard models of product differentiation, the education multiplier is greater for those private schools that faced a greater threat to their market power. Accounting for private sector responses increases the program’s cost-effectiveness by 85% and affects how a policy maker would target spending. Given that markets with several public and private schools are now pervasive in low- and middle-income countries, prudent policy requires us to account for private sector responses to public policy, both in policies’ design and evaluation.

We present unique audit-study evidence on health care quality in rural India, and find that most private providers lacked medical qualifications, but completed more checklist items than public providers and recommended correct treatments equally often. Among doctors with public and private practices, all quality metrics were higher in their private clinics. Market prices are positively correlated with checklist completion and correct treatment, but also with unnecessary treatments. However, public sector salaries are uncorrelated with quality. A simple model helps interpret our findings: Where public-sector effort is low, the benefits of higher diagnostic effort among private providers may outweigh costs of potential overtreatment.