Lost in the Mail

I just read an interesting paper by Marco Castillo and coauthors on crime in Peru. The study involves a field experiment where the researchers sent out a bunch of envelopes to people involved in the experiment. They signaled the presence of valuable items in the envelopes by making them thicker and/or implying that the letters were sent between relatives (who might be more likely to send valuable things).

This is a clever paper with three really interesting findings:
1) 18% of the envelopes never made it to their destination.
2) Thicker envelopes and those addressed to putative relatives were far less likely to make it.
3) Mail sent to poor neighborhoods did not make it to its destination 18% of the time and mail sent to really rich neighborhoods failed to arrive about 10% of the time. Where most of the mail was lost is in middle income neighborhood. Apparently, this is where the trade-off between the expected value of the envelope contents and the risk of facing retribution due to complaints from influential people is maximized.

Here's the kicker: Peru's mail system is privatized. While privatization is often tossed around as a solution to inefficiencies in developing countries, this paper makes the great point that such changes may have little impact if employees in the system are not held accountable. Ultimately, bad incentives are bad incentives are bad incentives.