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Benford's Law as an Indicator of Fraud in Economics

  • Karl-Heinz Tödter
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    Contrary to intuition, first digits of randomly selected data are not uniformly distributed but follow a logarithmically declining pattern, known as Benford's law. This law is increasingly used as a 'doping check' for detecting fraudulent data in business and administration. Benford's law also applies to regression coefficients and standard errors in empirical economics. This article reviews Benford's law and examines its potential as an indicator of fraud in economic research. Evidence from a sample of recently published articles shows that a surprisingly large proportion of first digits, but not of second digits, contradicts Benford's law. Copyright 2009 The Author. Journal Compilation Verein für Socialpolitik and Blackwell Publishing Ltd.

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    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0475.2009.00475.x
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    Article provided by Verein für Socialpolitik in its journal German Economic Review.

    Volume (Year): 10 (2009)
    Issue (Month): (08)
    Pages: 339-351

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    Handle: RePEc:bla:germec:v:10:y:2009:i::p:339-351
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    1. Hamermesh, Daniel S., 2007. "Replication in Economics," IZA Discussion Papers 2760, Institute for the Study of Labor (IZA).
    2. B. D. McCullough & H. D. Vinod, 2003. "Verifying the Solution from a Nonlinear Solver: A Case Study," American Economic Review, American Economic Association, vol. 93(3), pages 873-892, June.
    3. Andreas Diekmann, 2007. "Not the First Digit! Using Benford's Law to Detect Fraudulent Scientif ic Data," Journal of Applied Statistics, Taylor & Francis Journals, vol. 34(3), pages 321-329.
    4. David Giles, 2007. "Benford's law and naturally occurring prices in certain ebaY auctions," Applied Economics Letters, Taylor & Francis Journals, vol. 14(3), pages 157-161.
    5. Michael Graber & Andrey Launov & Klaus Wälde, 2008. "Publish or Perish? The Increasing Importance of Publications for Prospective Economics Professors in Austria, Germany and Switzerland," German Economic Review, Verein für Socialpolitik, vol. 9, pages 457-472, November.
    6. McCullough, B. D. & McGeary, Kerry Anne & Harrison, Teresa D., 2006. "Lessons from the JMCB Archive," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(4), pages 1093-1107, June.
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