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Audit Risk and Rent Extraction: Evidence from a Randomized Evaluation in Brazil

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  • Stephan Litschig
  • Yves Zamboni
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    Abstract

    We report results from a randomized policy experiment designed to test whether increased audit risk deters rent extraction in local public procurement and service delivery in Brazil. Our estimates suggest that temporarily increasing annual audit risk by about 20 percentage points reduced the proportion of local procurement processes involving mismanagement or corruption by about 17 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 based on user satisfaction surveys—or compliance with national regulations of the conditional cash transfer program Bolsa Fam�lia.

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    Bibliographic Info

    Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 554.

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    Date of creation: Feb 2012
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    Handle: RePEc:bge:wpaper:554

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    Keywords: corruption; rents; local governments; law enforcement;

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    1. Andrea Prat & Oriana Bandiera & Tommaso Valletti, 2007. "Active and Passive Waste in Government Spending: Evidence from a Policy Experiment," Levine's Bibliography 843644000000000100, UCLA Department of Economics.
    2. Miriam A. Golden & Lucio Picci, 2005. "Proposal For A New Measure Of Corruption, Illustrated With Italian Data," Economics and Politics, Wiley Blackwell, vol. 17, pages 37-75, 03.
    3. 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.
    4. Claudio Ferraz & Frederico Finan, 2011. "Electoral Accountability and Corruption: Evidence from the Audits of Local Governments," American Economic Review, American Economic Association, vol. 101(4), pages 1274-1311, June.
    5. Stephan Litschig & Yves Zamboni, 2008. "Judicial presence and rent extraction," Economics Working Papers 1143, Department of Economics and Business, Universitat Pompeu Fabra, revised Dec 2012.
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