One of the greatest bureaucratic barriers to doing business in the developing world are building safety inspections (World Bank, 2011, 2013). In Peru, the low probabilty of firms facing audits leads to a reduced incentive to comply with the law and opportunities for auditor corruption and other types of leakages. The regulatory environment of building safety for businesses is characterized by high administrative costs and low compliance. As a result, eventhough regulations mandate that all new businesses pass the Building Safety Inspection (BSI) to receive an operating license, many firms fail to comply with the standards. In partnership with the World Bank Group and the Ministry of Economy and Finance (Peru), the BSI study tests whether varying audit intensities and establishing a pay-for-performance system for the auditors improves the effectiveness and reduces leakages in Peru's BSI system.
The study experimentally tests two interventions to tackle identified constraints in the context of the new regulation and measure their effect on: i) compliance with regulation, and ii) leakages among auditors. The Peruvian government plans to pilot the interventions in four municipalities. The main outcomes of interest in this impact evaluation are the probability of passing the audit satisfactorily, the administrative costs to firms to pass an audit, and productivity losses due to the process. The results will help the government calibrate new regulations for the gradual scale-up of the pilots nationwide.
The study experimentally tests two interventions to tackle identified constraints in the context of the new regulation and measure their effect on: i) compliance with regulation, and ii) leakages among auditors. The Peruvian government plans to pilot the interventions in four municipalities. The main outcomes of interest in this impact evaluation are the probability of passing the audit satisfactorily, the administrative costs to firms to pass an audit, and productivity losses due to the process. The results will help the government calibrate new regulations for the gradual scale-up of the pilots nationwide.