Optimal fiscal policy depends on the marginal benefits of public spending. In developing countries corrupt officials often embezzle funds, so optimal policy should reflect marginal corruption. We analyze marginal corruption in the context of a statutory wage increase in India's employment guarantee scheme. Strikingly, workers received none of the increase even though initially they were on average overpaid. The data are inconsistent with theories of \voice" in which the threat of complaints limits corruption, but consistent with “greasing the wheels" theories in which (a) corruption undoes price interventions and (b) the market bounds how much rent officials can extract.

Theoretical work on disciplining corrupt agents has emphasized the role of promised future rents (e.g. efficiency wages) but not of illicit future rents. Yet when opportunities for future rent extraction increase, agents should extract less rent today in order to preserve those opportunities. We study this “golden goose" effect in the context of a statutory wage increase in India's employment guarantee scheme, comparing official micro-records to original household survey data to measure corruption. We estimate large golden goose effects that reduced the total impact of the wage increase on theft by roughly 64%.

India’s biometric unique ID Aadhaar has been at the forefront of the global revolution in digital identification, and India’s most significant investment in state capacity over the past decade. Yet, its application to social protection programs has been controversial. Proponents claim that the use of Aadhaar to identify and authenticate beneficiaries in these programs has led to considerable fiscal savings, while critics claim that it has led to denial of benefits to the marginalized and caused substantial harm. We review research on the use and impact of Aadhaar in social programs in India over the last decade. Our main takeaway from the review is that biometric authentication has reduced leakage in multiple settings, but its impact on beneficiaries depends crucially on the protocols and details of implementation. We conclude with a list of policy suggestions for obtaining the benefits of Aadhaar while minimizing the risk of harm to beneficiaries.