Fake letters assess government efficiency
By Jenny Che, The Dartmouth Staff
Published on Friday, August 17, 2012
Using the postal service as an indicator of government efficiency, a Dartmouth economics professor and three other economists found that high-income countries are more effective in managing and responding to mail in an institutional environment unmarked by corruption. Rafael LaPorta, an economics professor at the Tuck School of Business, Alberto Chong of the University of Ottawa, Andrei Shleifer of Harvard University and Florencio Lopez-de-Silanes of EDHEC Business School in France mailed letters to fake addresses in 159 countries to assess why governments functioned poorly for reasons other than corruption.
In the study — which was covered by the Associated Press on Aug. 8 — the team sent two letters to each country’s two largest cities addressed to invented businesses and street names and waited one year for responses. On each envelope, they wrote, “Please return to sender if undeliverable.”
Within a year, 59 percent of the letters were returned, while 35 percent came back within three months. Only four countries sent back all 10 letters within 90 days: the United States, El Salvador, the Czech Republic and Luxembourg.
Sixteen countries never returned the letters, including Tajikistan, Cambodia, Russia and several African nations.
Letters came back faster and more consistently from highly educated countries. For high-income countries, nearly 85 percent of the letters were returned, compared to less than one-third from low-income countries, according to the study.
The countries are all members of the Universal Postal Union, a governing body which stipulates that all undeliverable letters be returned within a month.
“We were very interested in the question of why governments are better when countries develop, when they are less corrupt and perform services in a more timely manner,” La Porta said. “There’s the idea that for countries to develop, they need a place for institutions. We’re trying to understand where good institutions come from.”
The leading explanation for why governments do not function effectively is corruption, La Porta said. In order to find another way to measure efficiency, the team chose the postal service, a simple, widespread institution that is not as open to corruption.
“Suppose I send a container to Argentina — it would take a very long time to get to customs, and the employee could ask for a bribe in order to let it enter the country,” La Porta said. “But this power doesn’t exist when I send a letter.”
The results indicate that governments in developing countries are inefficient because they face the same problems in the public sector as in the private sector — problems that are not due to corruption.
Inefficiency can be attributed to weak management, technology and human and physical capital, according to La Porta.
“It’s the notion that a large, efficient organization requires being able to monitor workers and make sure that when they receive letters that are harder to process because they can’t reach their addressees, they don’t throw them out but perform more costly efforts,” La Porta said. “It’s the choice to go to lunch early or see how to get the letter through.”
Past literature on inefficiencies in the private sector has shown that countries with strong family ownership and weaker market competition, such as India, have poorer management than countries with competitive market structures and less family ownership, such as the United States, according to La Porta
Further research could look into the reasons behind management talent in the public sector where compelling factors such as capital, technology and corruption are absent, he said.
“You pick places where there is no technological progress [to compare], so you can’t say that the U.S. is better just because they have better capital,” La Porta said.
In February, the U.S. Postal Service was declared first in the world for efficiency by England’s Oxford Strategic Consulting. It serves more citizens per office than the countries ranked below it and delivers more letters per employee than any other country in the G20.
The USPS, which is not supported by taxpayers, lost $5 billion last year and is facing its first-ever default, according to Business Insider. Despite its level of efficiency compared to that of other countries. USPS is facing increasing competition from the Internet and private services such as FedEx and UPS.