Unintended consequences: When policy backfires in unforeseen ways
Evidence on VoxDev has shed light on many examples of unintended consequences in economics. What have we learned from when things go wrong?
Economies, societies and ecosystems are complex. Interventions with a particular goal in mind can end up having a number of unforeseen consequences. Economic research has highlighted many examples of policies backfiring and leading to unexpected outcomes.
Despite there probably being too much focus on these cases relative to policy success stories (at least based on the development economics research I see), we have still learnt a lot about improving policy design from policies that went wrong, from the war on drugs, biodiversity, baby formula, prisons, and more.
I have highlighted some of the interesting examples we have featured on VoxDev, in no particular order, and conclude by reflecting on what we can learn from this type of research.
Unintended crime: How the war on drugs can backfire
Research in Mexico and Colombia has shown how government tactics in the war on drugs can deepen, not diminish, organised crime. In Mexico, the intensification of anti-drug policies, after President Felipe Calderó declared a war on drugs in 2006, intended to dismantle cartels and reduce violence. However, Giacomo Battiston, Gianmarco Daniele, Marco Le Moglie and Paolo Pinotti find that cartels adapted by diversifying their income streams and rapidly expanding oil theft operations. In municipalities with oil pipelines, cartel presence rose by roughly 30%, and there was a significant drop in school attendance for children under 15.
In Colombia, Daniel Mejia, Mounu Prem and Juan F. Vargas find that advance announcements of tougher coca‑eradication campaigns prompted farmers to expand coca fields before the crackdown, leaving net cultivation higher than before. Together, this research shows how tighter enforcement can simply shift rents rather than removing them, leading criminal organisations to re‑optimise and society bearing the cost.
Unintended poisoning: The spectre of animal extinction
India’s near‑extinction of vultures, starting in the mid-1990s, was an unintended result of farmers dosing cattle with the anti‑inflammatory drug diclofenac. Vultures which consumed carrion containing this drug died within weeks, removing nature’s most efficient carrion cleaner. Research by Anant Sudarshan and Eyal Frank links the loss to an explosion in feral dog populations feeding on untreated carcasses, a surge in rabies, and falling water quality. In turn, this resulted in a 4% rise in all‑cause human death rates in the worst‑hit districts. In a recent podcast, Eyal Frank outlines a number of similar examples from different places and species which highlight how biodiversity shocks can transmit quickly to human mortality and fiscal costs.
Unintended exclusion: Modernising the state can have unforeseen consequences
In 2007, local authorities in Punjab promised to digitise land records across the province. This type of digitisation reform was seen as a key step to modernise governance and strengthen property rights. Research has documented a number of positive impacts of this reform, but Shan Aman-Rana and Clement Minaudier find that digitisation also had dramatic consequences for the state’s ability to collect taxes. Bureaucrats, who had previously controlled the land records, lost influence. This resulted in a dramatic reduction in tax collection – digitised districts collected 51% less taxes after the reform.
Linking India’s Public Distribution System to the biometric Aadhaar ID was an incredibly ambitious social policy reform aiming to reduce corruption in India. But Karthik Muralidharan, Paul Niehaus and Sandip Sukhtankar found that for those 23% of beneficiaries who did not link their biometric identification to benefit rolls, this reform led to a 10% reduction in the benefits they received, with 2.8% receiving no benefits at all.
Unintended losers: Important ways that NREGA has backfired
India’s employment guarantee, the Mahatma Gandhi National Rural Employment Guarantee Act (NREGA), was a flagship policy that has been intensively studied by economists. Research on VoxDev has identified a range of positive benefits, including raised incomes and conflict moderation. But, as is probably to be expected with a policy of this scale, researchers have also identified important unintended consequences.
Female labour‑force participation – By guaranteeing local, low‑skilled jobs at a fixed wage, NREGA reduced the incentive for rural women to seek or accept private‑sector work that often pays more. Jorge Luis García finds that female labour‑force participation and earnings both fell, particularly where programme wages lagged behind market rates, weakening rather than empowering women economically.
Children’s schooling – Bryce Millet Steinberg and Manisha Shah identify important unintended consequences for children, showing that attendance dropped for adolescents by 1–3.5 percentage points. Increased labour demand due to NREGA, which increased the opportunity cost of schooling, can explain these results.
Unintended overcrowding: When resources don’t scale with demand
Morocco’s conditional‑cash‑transfer programme, known as Tayssir, dramatically cut dropout rates, even when scaled up nationwide. However, Jules Gazeaud and Claire Ricard find that the sudden enrolment surge packed classrooms: average class size jumped by 3.6 students by the end of primary school, and within‑class variation widened. As a result, test scores fell. Targeted transfers, the authors argue, must be matched with investment in teachers and infrastructure to avoid quality dilution.
Unintended consequences: Other fascinating examples
In some circumstances, prisons actually foster rather than prevent crime: Maria Antonia Escobar, Santiago Tobón & Martín Vanegas-Arias.
Nestlé’s entry into low- and middle-income country markets dramatically increased infant deaths among mothers with no access to clean water: Jesse Anttila-Hughes, Lia Fernald, Paul Gertler, Patrick Krause, Eleanor Tsai & Bruce Wydick.
A GPT-4 powered AI business assistant via WhatsApp benefitted high performing entrepreneurs in Kenya, but low performers did worse: Podcast with Rembrand Koning.
Evidence from Jordan shows that housing subsidies for Syrian refugees had limited benefits for refugee well-being while worsening social cohesion: Abdulrazzak Tamim, Emma Smith, Bailey Palmer, Edward Miguel, Sandra Rozo, Sarah Stillman and Samuel Leone.
The introduction of state pensions in Indonesia and Ghana lead to a cultural shift away from children looking after their parents, which resulted in a reduction in education: Video with Natalie Bau.
US military aid has unintended consequences: Eugen Dimant, Tim Krieger and Daniel Meierrieks.
What do we learn from research on unintended consequences?
In some cases, the lessons are clear - i.e. immediately put an end to dishonest and unsafe marketing practices in the baby formula industry.
In others, they are less clear. While this type of research can highlight issues with policies, they don’t tell us about net impacts. Should NREGA stop altogether because of the unintended consequences that have been documented by economic research? Or do these require tweaking the policy, or implementing additional measures to protect those losing out?
Having closely monitored economic research for a number of years, I have noticed that these thorny questions are rarely answered by single academic papers. Economists’ ability to turn a single policy or reform into a number of different papers focusing on different outcomes is consistently impressive. To be clear, this is not a dig at economists, as it makes perfect sense given their ‘publish or perish’ incentives. However, from a policy perspective, a single paper covering the various outcomes of a policy would be much preferred, if not always possible. But this only results in one paper, and weighting different outcomes to reach an overall judgement is harder to do rigorously.
Improving academic incentives to create more policy relevant research is an idea frequently raised on panels, but is much easier said than done. If you have come across any practical ideas, interesting writing, or new initiatives in this vein, please do let me know (ohanney@cepr.org).
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