Integrating Firms’ Perspectives into Policy Making: A Behavioural Approach

Nudge Turkey undertook a project to increase the uptake of government subsidies by SMEs. Analysis showed our subsidies were used by a limited number of big companies, and government could reach the SMEs who need financial support the most. By interacting more closely with the firms, they clarified the pain points for the SMEs. Based on firms' feedback, organisers created a user-friendly website for explaining subsidies, and sent over 30,000 emails that used behavioural messages to nonapplicant firms.

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Nudge Turkey, is the first official body in the Turkish public sector that incorporates behavioural insights into the policy design process. We believe that public policy should be human-oriented and evidence-based. Therefore, our project used behavioural principles and conducted a randomised control trial (RCT), which makes it first of its kind in Turkey.

In Turkey, as in many countries, there is no comprehensive exploration phase where we can gather information about the roots of a particular behaviour. Another reflection of this type of policy design is the language of the legislation and the way of communication. Experts talk the language of experts to explain an issue to people who might have no background in that particular area. By focusing on the citizens, we try to understand the causes of specific behaviours, therefore, the experts take into account the citizen perspective and shape the legislation accordingly. Another contribution is the frequent use of experiments to analyse the impact of different policies with small samples where possible. In the Turkish public policy environment, the conventional policy design does not include testing alternative policy proposals.

Our project was funded by the British Embassy in Turkey. The Behavioural Insights Team (BIT) from the UK provided consultancy and EY Turkey managed the implementation. BIT provided technical assistance on how to set up a nudge unit and how to apply behavioural insights to the issue we selected.

The major goal of our first project was to increase the utilisation of the subsidies, particularly by SMEs. Our analysis showed that 86% of the registered exporters who are eligible for at least one type of subsidy did not get support from our ministry. The data reveal even a more significant problem about utilisation of the subsidies. Our subsidies are used by the big companies who are familiar with the processes and have the necessary resources to manage the application process. However, we can not reach to SMEs who need our financial support the most.

Nudge Turkey's project had three main phases namely explore, intervention and analysis. In the first phase, we randomly chose exporters who did not receive any subsidy and made face-to-face interviews. The survey results indicate 77% of the firms did not know how to apply, 43% of them received positive feedback about the subsidies and more importantly, 62% believe that even if they apply they can not receive the subsidy. The main arguments of the last group include reasons such as they can not finish the application process due to complex procedures, they do not have sufficient resources to successfully complete the application process or they can not receive the subsidies due to their political association. It is important to note that these firms have never gone through the process and at least half of them received positive feedback from other firms. Therefore, Nudge Turkey decided to focus on awareness and accessibility. They designed an intervention that increases awareness for the subsidies but also encourages them to apply by addressing their concerns and prejudices.
In the intervention phase, we designed our randomised control trial (RCT). They first identified the target firms and randomly allocated these 30,000 nonapplicant firms to 1 control and 4 treatment groups.

Two separate tools were created for intervention: The e-mail messages and the subsidy website (kolaydestek.gov.tr).
Four different e-mail messages were designed.
1. Standard email – this is a basic email that introduces what the subsidies are and sets out that the recipient is likely to be eligible.
2. Message from a Minister + reciprocity – this message is directly from the Minister and seeks to create a sense of reciprocity between the Minister and the business
3. Honest + salient benefits + preparedness – this message builds on the previous one by also preparing the recipient for their application with five simple steps.
4. Testimonial - this message is directly from a business that has received the subsidies.

In addition to the e-mails, a new website has launched in order to provide information to the SMEs. The main advantage of this website is the way of providing information. There is no reference to the sophisticated legislation. The main takeaways are explained in a few sentences. The application process is shown by infographics with a few steps. The application documents can be directly downloaded from this website. Also, the firms can contact directly the experts for each subsidy.

As of submitting, Nudge Turkey were in the final phase, the analysis. The preliminary results show that applications increased by 33% with the testimonial message compared to the control group (at the 8% significance level)

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Year: 2018
Level of government: National/Federal government

Status:

  • Evaluation - understanding whether the innovative initiative has delivered what was needed
  • Diffusing Lessons - using what was learnt to inform other projects and understanding how the innovation can be applied in other ways

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