To test efficiency, economists mail fake letters

CONCORD, N.H. (AP) - August 8, 2012

Rafael LaPorta and three economists at other universities mailed letters to nonexistent businesses in 159 countries - two letters to each country's five biggest cities - and waited a year to see which were sent back to the college's Tuck School of Business in Hanover.

The goal was to use a simple and universal service to explore why, other than corruption, developing countries tend to have poorly performing governments.

After a year, 59 percent of the letters were returned, though only 35 percent came back within three months. Only four countries sent all 10 letters back within 90 days: the United States, El Salvador, Czech Republic and Luxembourg. Sixteen countries returned no letters, including Tajikistan, Cambodia, Russia and several in Africa.

For high-income countries, nearly 85 percent of the letters were returned, while less than a third of the letters sent to low-income countries came back. More letters came back, and faster, from highly educated countries.

The results suggest that governments in developing countries suffer from the same inefficiencies as the private sector, including inferior "inputs" (human and physical capital and technology) and mismanagement, the economists wrote in a National Bureau of Economic Research working paper.

While that finding was not surprising, "it is still important to recognize that not all bad government is caused by politics," wrote the group, which also included Alberto Chong of the University of Ottawa, Andrei Shleifer of Harvard University and Florencio Lopez-de-Silanes of EDHEC Business School in France.

All the letters went to countries that subscribe to the Universal Postal Union, which requires that incorrectly addressed mail be returned within a month. Each addressee was a common name in the country. A variety of fake business names were used, such as Computer Management Professionals or Inventory Technology Partners, and names of Nobel laureates in Economics and famous composers were used as street names. Under the address was a notation "Please Return to Sender if Undeliverable."

The group said its approach to measuring government efficiency had two key advantages - they focused on a fairly simple government service common to all the countries and the service is one in which corruption plays no role.

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