PSD reviewing paper that alleges civil servants disproportionately bought homes near unannounced MRT stations

[SINGAPORE] The Public Service Division (PSD) is reviewing a research paper published by a US-based non-profit organisation that claimed Singapore civil servants disproportionately bought homes near MRT stations that had not yet been publicly announced.

The PSD said on Monday (Sep 14) that it is looking at the data and methodology within the academic working paper and will refer any issue to the Corrupt Practices Investigation Bureau “if there is a material basis to do so”.

“We take any integrity concerns extremely seriously,” said a spokesperson for the department, which sits under the Prime Minister’s Office, in response to queries from the media.

The National Bureau of Economic Research (NBER), which is a private outfit headquartered in Cambridge, Massachusetts, published the working paper titled Do Social Norms Substitute for Enforcement? Evidence from Public Officials’ Home Purchases in Singapore in September.

The named authors of the paper are Tomasz Piskorski from Columbia University, Amit Seru and Chun Zhao from Stanford University, and Jian Zhang from the University of Hong Kong.

The authors said that they wanted to study whether pro-integrity social norms could substitute for formal enforcement in deterring misconduct by public officials.

The first line of their working paper stated that they “benefited immensely from discussions” with a list of individuals, including economist Li Shengwu, the estranged nephew of Senior Minister Lee Hsien Loong.

Others thanked include several current and former academics at the National University of Singapore such as Sumit Agarwal, Jessica Pan, Ivan Png and Bernard Yeung. Png told The Straits Times that he has asked the lead author of the paper to remove his name, adding that he was not aware of the manuscript and did not comment on it.

The paper examines housing transactions around planned expansions of the MRT system, using what it describes as “universe-level housing transactions”.

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The authors said they began their study by assembling private-property transactions from legal filings in Singapore and linked buyers to the Singapore Government Directory Interactive – an online database of public officers – to identify civil servants and trace their transaction histories.

They then focused on purchases near planned – but not yet publicly announced – MRT stations around announcement dates.

“We find clear evidence of informed trading by civil servants,” said the authors.

They cited findings that purchase intensity near planned MRT stations was higher for civil servants compared with a control group of non-civil servants with similar demographic attributes and housing consumption behaviours.

The effect was concentrated one to two years before public announcements and among mid-level officials and agencies connected to rail planning, according to the paper.

The researchers said the pattern generated “meaningful private gains” and also appeared among relatives, which they said was consistent with information leakage.

The paper notes that as a working paper published by the NBER, it is “circulated for discussion and comment purposes”. It has not been peer-reviewed or subject to review by the NBER board of directors that accompanies official NBER publications.

Peer review is a scholarly process where fellow experts or academics independently assess a paper for its validity and quality, among other factors.

The data and method

The researchers reached their conclusion by tracking house trading activity of civil servants and other individuals through three data streams, one of which was described as a “proprietary source”.

The proprietary source was described as containing demographic details and residence addresses of “a large sample” of Singaporean residents as of 2013, without going into further detail. The Straits Times has contacted the paper’s authors for details on this source.

The other two data streams include six cohorts of civil servants as listed on the SGDI from the years 2007, 2009, 2011, 2013, 2015 and 2022, and the Council for Estate Agencies’ public register of licensed real estate agents in Singapore.

The SGDI data was further augmented using OpenAI’s GPT 4.0, where job titles were mapped into three rank tiers, as the researchers wanted to test if the informed buying behaviour was more concentrated among high-, middle- or low-level officials.

All three data streams were integrated with property transaction data from the legal or caveat filings of private property transactions with the Registry of Land Titles between January 1995 and December 2019, the paper stated. This data included names of buyers and sellers.

The researchers, meanwhile, identified civil servants’ connections by looking up the people listed as co-occupants or co-registrants at the residential address registered to the civil servant.

The paper stated that these individuals were referred to as “relatives” for expositional convenience, as the researchers tested the spillover effects of informed purchases around station announcements.

The researchers used mapping tools to geocode MRT stations and identify private homes that sit within the planned stations’ 1 km, 1.5 km or 2 km radius.

The control group are individuals identified to be broadly similar in age, gender, marital status, ethnicity and estimated monthly income. Income was approximated using a proprietary consumer financial transaction dataset from a 2014 paper co-authored by Agarwal, it stated.

The findings

The researchers estimated that civil servants and people they identified as relatives made about 221 additional property purchases, near planned MRT stations in the years before the stations were publicly announced, compared with the matched control group.

Their analysis found this difference to be statistically significant.

These transactions would have been worth roughly S$270 million, according to their calculations.

Civil servants accounted for about 113 of those purchases, worth roughly S$138 million, which were made in the two years before announcements. People identified as relatives or co-registrants of the civil servants made 108 purchases, worth some S$132 million, in the three years before announcements.

The figures represent the estimated gross value of the properties purchased, rather than profits made by the buyers. The researchers said the gains from these investments are “economically meaningful relative to civil-service incomes”.

For civil servants, the difference was concentrated in the one- and two-year periods before an announcement.

The researchers’ baseline analysis focused on properties within 1 km of planned stations, but they also found similar increases in civil servants’ purchase intensity when they expanded the radius to 1.5 km and 2 km.

They also found that the properties subsequently generated positive returns relative to comparable properties, with the gains particularly pronounced over shorter holding periods.

The buyers were also more likely to sell earlier, particularly in the first to eight years after purchase, according to projected estimates – a pattern the researchers said was consistent with investment-driven behaviour and timely exits.

The purchases were also concentrated among mid-level civil servants rather than the most senior officials or junior staff. Additionally, the researchers also found stronger effects among officials working in agencies involved in rail-line planning.

In their analysis, the researchers said the pattern was expected as mid-level officials face the highest net temptation, given that they have sufficient resources to act while bearing lower expected scrutiny and reputational costs than senior officials.

The authors also compared the transaction patterns of civil servants against groups of real estate agents and corporate board members. But they found neither group showed a similar increase in purchases near unannounced MRT stations. THE STRAITS TIMES