Rohini Pande Photo

Rohini Pande

Appointment
Rafik Hariri Professor of International Political Economy
Office Address
79 John F. Kennedy St. Rubenstein Bldg 340
617-384-5267
Email Mailing Address
Duflo, Esther, Michael Greenstone, Rohini Pande, and Nicholas Ryan. "Truth-telling by Third-party Auditors and the Response of Polluting Firms: Experimental Evidence from India." Quarterly Journal of Economics 128.4 (2013): 1499–1545.

Abstract

In many regulated markets, private, third-party auditors are chosen and paid by the firms that they audit, potentially creating a conflict of interest. This article reports on a two-year field experiment in the Indian state of Gujarat that sought to curb such a conflict by altering the market structure for environmental audits of industrial plants to incentivize accurate reporting. There are three main results. First, the status quo system was largely corrupted, with auditors systematically reporting plant emissions just below the standard, although true emissions were typically higher. Second, the treatment caused auditors to report more truthfully and very significantly lowered the fraction of plants that were falsely reported as compliant with pollution standards. Third, treatment plants, in turn, reduced their pollution emissions. The results suggest reformed incentives for third-party auditors can improve their reporting and make regulation more effective.