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Audit risk and rent extraction: Evidence from a randomized evaluation in Brazil

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  • Zamboni, Yves
  • Litschig, Stephan

Abstract

We report results from a randomized policy experiment designed to test whether increased audit risk deters rent extraction in three areas of local government activity in Brazil: procurement, health service delivery and cash transfer targeting. Our estimates suggest that temporarily increasing annual audit risk by about 20 percentage points reduced the share of audited resources involved in corruption in procurement by about 10 percentage points and the proportion of procurement processes with evidence of corruption by about 15 percentage points. In contrast, we find no evidence that increased audit risk affected the quality of publicly provided preventive and primary health care services - measured through user satisfaction surveys - or compliance with eligibility requirements for the conditional cash transfer program - measured through household inspections. The observed impact heterogeneity across activities is consistent with differences in potential sanctions and in the probability that a sanction is applied, conditional on detection.

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  • Zamboni, Yves & Litschig, Stephan, 2018. "Audit risk and rent extraction: Evidence from a randomized evaluation in Brazil," Journal of Development Economics, Elsevier, vol. 134(C), pages 133-149.
    • Handle: RePEc:eee:deveco:v:134:y:2018:i:c:p:133-149
    DOI: 10.1016/j.jdeveco.2018.03.008
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    Cited by:

    1. Gianmarco Daniele & Tommaso Giommoni, 2019. "Corruption under Austerity," BAFFI CAREFIN Working Papers 19131, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    2. Colonnelli, Emanuele & Lagaras, Spyridon & Ponticelli, Jacopo & Prem, Mounu & Tsoutsoura, Margarita, 2022. "Revealing corruption: Firm and worker level evidence from Brazil," Journal of Financial Economics, Elsevier, vol. 143(3), pages 1097-1119.
    3. Britto, Diogo G.C. & Fiorin, Stefano, 2020. "Corruption and legislature size: Evidence from Brazil," European Journal of Political Economy, Elsevier, vol. 65(C).
    4. Gauthier, Bernard & Goyette, Jonathan & Kouamé, Wilfried A.K., 2021. "Why do firms pay bribes? Evidence on the demand and supply sides of corruption in developing countries," Journal of Economic Behavior & Organization, Elsevier, vol. 190(C), pages 463-479.
    5. Ryan Jablonski & Brigitte Seim & Mariana Carvalho Barbosa & Clark Gibson, 2023. "Using remote tracking technologies to audit and understand medicine theft," WIDER Working Paper Series wp-2023-126, World Institute for Development Economic Research (UNU-WIDER).
    6. Conover, Emily & Kraynak, Daniel & Singh, Prakarsh, 2023. "The effect of traffic cameras on police effort: Evidence from India," Journal of Development Economics, Elsevier, vol. 160(C).
    7. Afridi, Farzana & Dhillon, Amrita & Chaudhuri, Arka Roy & Kaur, Dashleen, 2020. "Efficacy of Top down audits and Community Monitoring," OSF Preprints akpdy, Center for Open Science.
    8. Nishijima, Marislei & Ellis, Randall P. & Cati, Regina C., 2022. "Primary healthcare effects of a well-designed anti-corruption program," World Development Perspectives, Elsevier, vol. 25(C).
    9. Antonio Estache & Renaud Foucart & Tomas Serebrisky, 2022. "When can lotteries improve public procurement processes?," Working Papers 359001116, Lancaster University Management School, Economics Department.
    10. Giulia Mugellini & Sara Della Bella & Marco Colagrossi & Giang Ly Isenring & Martin Killias, 2021. "Public sector reforms and their impact on the level of corruption: A systematic review," Campbell Systematic Reviews, John Wiley & Sons, vol. 17(2), June.
    11. Morelli, Massimo & Giommoni, Tommaso & Nicolò, Antonio, 2020. "Corruption and Extremism," CEPR Discussion Papers 14634, C.E.P.R. Discussion Papers.
      • Attila Gaspar & Tommaso Giommoni & Massimo Morelli & Antonio Nicolò, 2021. "Corruption and Extremism," BAFFI CAREFIN Working Papers 21163, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    12. Maria Vittoria Levati & Chiara Nardi, 2019. "The power of words in a petty corruption experiment," Working Papers 18/2019, University of Verona, Department of Economics.
    13. Elliott Ash & Sergio Galletta & Tommaso Giommoni, 2021. "A Machine Learning Approach to Analyze and Support Anti-Corruption Policy," CESifo Working Paper Series 9015, CESifo.
    14. Tsur, Yacov, 2022. "Political tenure, term limits and corruption," European Journal of Political Economy, Elsevier, vol. 74(C).
    15. Kendall D. Funk & Erica Owen, 2020. "Consequences of an Anti‐Corruption Experiment for Local Government Performance in Brazil," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 39(2), pages 444-468, March.
    16. Levati, M. Vittoria & Nardi, Chiara, 2023. "Letting third parties who suffer from petty corruption talk: Evidence from a collusive bribery experiment," European Journal of Political Economy, Elsevier, vol. 76(C).
    17. Maximiliano Lauletta & Martín A. Rossi & Christian A. Ruzzier, 2022. "Audits and Government Hiring Practices," Economica, London School of Economics and Political Science, vol. 89(353), pages 214-227, January.
    18. Prasenjit Banerjee & Vegard Iversen & Sandip Mitra & Antonio Nicolò & Kunal Sen, 2020. "Moral reputation and political selection in a decentralized democracy: Theory and evidence from India," WIDER Working Paper Series wp-2020-26, World Institute for Development Economic Research (UNU-WIDER).
    19. Maximiliano Lauletta & Martín A. Rossi & Christian A. Ruzzier, 2020. "Audits and the Quality of Government," Asociación Argentina de Economía Política: Working Papers 4404, Asociación Argentina de Economía Política.
    20. Maximiliano Lauletta & Martín Rossi & Christian Ruzzier, 2021. "Playing Whac-A-Mole in the Fight against Corruption: Evidence from Random Audits in Brazil," Working Papers 157, Universidad de San Andres, Departamento de Economia, revised Sep 2021.
    21. De La O, Ana L. & González, Lucas I. & Weitz-Shapiro, Rebecca, 2023. "Voluntary audits: Experimental evidence on a new approach to monitoring front-line bureaucrats," World Development, Elsevier, vol. 162(C).
    22. Guglielmo Barone & Laura Conti & Gaia Narciso & Marco Tonello, 2020. "Auditors conflict of interest: does random selection work?," Trinity Economics Papers tep0820, Trinity College Dublin, Department of Economics.
    23. De La O, Ana L. & Fernández-Vázquez, Pablo & Martel García, Fernando, 2023. "Federal and state audits do not increase compliance with a grant program to improve municipal infrastructure: A pre-registered field experiment," Journal of Development Economics, Elsevier, vol. 162(C).

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    More about this item

    Keywords

    Government audit; Corruption; Procurement; Cash transfer program; Health service delivery;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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