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The marginal rate of corruption in public programs: Evidence from India

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  • Niehaus, Paul
  • Sukhtankar, Sandip

Abstract

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 theories of “exit” in which outside options in the private sector limit how much rent officials can extract.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 104 (2013)
Issue (Month): C ()
Pages: 52-64

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Handle: RePEc:eee:pubeco:v:104:y:2013:i:c:p:52-64

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Web page: http://www.elsevier.com/locate/inca/505578

Related research

Keywords: Corruption; Leakage; Voice; Exit; Public programs;

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References

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  8. Ritva Reinikka & Jakob Svensson, 2004. "Local Capture: Evidence From a Central Government Transfer Program in Uganda," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 678-704, May.
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  18. Ritva Reinikka & Jakob Svensson, 2005. "Fighting Corruption to Improve Schooling: Evidence from a Newspaper Campaign in Uganda," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 259-267, 04/05.
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Cited by:
  1. Claudio Ferraz & Frederico Finan & Diana B. Moreira, 2012. "Corrupting Learning: Evidence from Missing Federal Education Funds in Brazil," NBER Working Papers 18150, National Bureau of Economic Research, Inc.
  2. Patrick Carter, 2012. "Aid Allocation Rules," Bristol Economics Discussion Papers 12/630, Department of Economics, University of Bristol, UK.
  3. Esther Duflo & Michael Greenstone & Nicholas Ryan, 2013. "Truth-telling by Third-party Auditors and the Response of Polluting Firms: Experimental Evidence from India," The Quarterly Journal of Economics, Oxford University Press, vol. 128(4), pages 1499-1545.
  4. François Gerard & Gustavo Gonzaga, 2013. "Informal Labor and the Cost of Social Programs: Evidence from 15 Years of Unemployment Insurance in Brazil," Textos para discussão 608, Department of Economics PUC-Rio (Brazil).

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