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Can Results-Based Payments Reduce Corruption?-Working Paper 345

  • Charles Kenny, William Savedoff

    ()

A common objection to results-based programs is that they are somehow more vulnerable to corruption. This paper explains why results-based approaches to foreign aid may be less vulnerable to corruption than the traditional approaches which monitor and track the purchase and delivery of inputs and activities. The paper begins by classifying different corruption costs and specifically distinguishes the problem of diverted funds from the costs associated with failing to generate benefits. It then characterizes the key differences between traditional input-tracking programs and results-based approaches in terms of how they are supposed to work, the implicit risks that preoccupy designers, how they function in practice, and what this means both for the scale of corruption and the realization of benefits. It then considers the conditions under which one approach or another might be more appropriate. The paper concludes that input-tracking approaches are vulnerable to corruption because they have high failure costs and a weak track record for controlling diverted funds. By contrast, results-based approaches are less prone to failure costs and limit the capacity of dishonest agents to divert funds unless those agents first improve efficiency and outputs.

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File URL: http://www.cgdev.org/sites/default/files/can-results-based-payments-reduce-corruption.pdf
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Paper provided by Center for Global Development in its series Working Papers with number 345.

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Length: 30 pages
Date of creation: Sep 2013
Date of revision:
Handle: RePEc:cgd:wpaper:345
Contact details of provider: Web page: http://www.cgdev.org

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  1. Benjamin A. Olken, 2005. "Monitoring Corruption: Evidence from a Field Experiment in Indonesia," NBER Working Papers 11753, National Bureau of Economic Research, Inc.
  2. Dollar, David & Levin, Victoria, 2005. "Sowing and reaping: institutional quality and project outcomes in developing countries," Policy Research Working Paper Series 3524, The World Bank.
  3. James R. Hines, Jr., 1995. "Forbidden Payment: Foreign Bribery and American Business After 1977," NBER Working Papers 5266, National Bureau of Economic Research, Inc.
  4. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
  5. Auriol, Emmanuelle, 2006. "Corruption in procurement and public purchase," International Journal of Industrial Organization, Elsevier, vol. 24(5), pages 867-885, September.
  6. Michael Kremer & Nazmul Chaudhury & F. Halsey Rogers & Karthik Muralidharan & Jeffrey Hammer, 2005. "Teacher Absence in India: A Snapshot," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 658-667, 04/05.
  7. Rioja, Felix K., 2003. "Filling potholes: macroeconomic effects of maintenance versus new investments in public infrastructure," Journal of Public Economics, Elsevier, vol. 87(9-10), pages 2281-2304, September.
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