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An experimental inquiry into the effect of yardstick competition on corruption

  • Angelino Viceisza

This study reports theory-testing laboratory experiments on the effect of yardstick competition on corruption. On the incumbent side, yardstick competition acts as a corruption-taming mechanism if the incumbent politician is female. On the voter side, voters focus on the difference between the tax rate in their own jurisdiction and that in another. If the tax rate is deemed unfair compared to the one in another jurisdiction, voters re-elect less. The findings support the claim by Besley and Case (1995) that incumbent behavior and tax setting are tied together through the nexus of yardstick competition. This renders generalizability to these laboratory experiments and addresses some concerns raised by Levitt and List (2007).

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File URL: http://excen.gsu.edu/workingpapers/GSU_EXCEN_WP_2007-09.pdf
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Paper provided by Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University in its series Experimental Economics Center Working Paper Series with number 2007-09.

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Length: 19
Date of creation: Oct 2007
Date of revision:
Handle: RePEc:exc:wpaper:2007-09
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  1. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 681-712.
  2. Browning, Edgar K, 1976. "The Marginal Cost of Public Funds," Journal of Political Economy, University of Chicago Press, vol. 84(2), pages 283-98, April.
  3. Potters, J.J.M. & Rockenbach, B. & Sadrieh, A. & van Damme, E.E.C., 2004. "Collusion under yardstick competition : An experimental study," Other publications TiSEM 2f5fc044-063c-477d-bf98-d, Tilburg University, School of Economics and Management.
  4. Jan Potters & Martin Sefton & Lise Vesterlund, 2007. "Leading-by-example and signaling in voluntary contribution games: an experimental study," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 33(1), pages 169-182, October.
  5. BELLEFLAMME, Paul & HINDRIKS, Jean, 2002. "Yardstick competition and political agency problems," CORE Discussion Papers 2002029, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Toke S. Aidt, 2003. "Economic analysis of corruption: a survey," Economic Journal, Royal Economic Society, vol. 113(491), pages F632-F652, November.
  7. Smith, Vernon L, 1989. "Theory, Experiment and Economics," Journal of Economic Perspectives, American Economic Association, vol. 3(1), pages 151-69, Winter.
  8. Besley, Timothy & Smart, Michael, 2007. "Fiscal restraints and voter welfare," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 755-773, April.
  9. Brit Grosskopf & Rajiv Sarin, 2010. "Is Reputation Good or Bad? An Experiment," American Economic Review, American Economic Association, vol. 100(5), pages 2187-2204, December.
  10. Klaus Abbink, 2006. "Laboratory experiments on corruption," Monash Economics Working Papers archive-38, Monash University, Department of Economics.
  11. Pranab Bardhan & Dilip Mookherjee, 2005. "Decentralization, Corruption and Government Accountability: An Overview," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-152, Boston University - Department of Economics.
  12. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
  13. Miller, Ross M. & Plott, Charles R., . "Product Quality Signaling in Experimental Markets," Working Papers 447, California Institute of Technology, Division of the Humanities and Social Sciences.
  14. Steven D. Levitt & John A. List, 2007. "What Do Laboratory Experiments Measuring Social Preferences Reveal About the Real World?," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 153-174, Spring.
  15. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  16. Vito Tanzi, 1998. "Corruption Around the World; Causes, Consequences, Scope, and Cures," IMF Working Papers 98/63, International Monetary Fund.
  17. Harsanyi, John C, 1995. "Games with Incomplete Information," American Economic Review, American Economic Association, vol. 85(3), pages 291-303, June.
  18. Lockwood, Ben, 2005. "A Note on the Hybrid Equilibrium in the Besley-Smart Model," The Warwick Economics Research Paper Series (TWERPS) 727, University of Warwick, Department of Economics.
  19. Libor Dušek & Andreas Ortman & Lubomír Lízal, 2005. "Understanding Corruption and Corruptibility Through Experiments," Prague Economic Papers, University of Economics, Prague, vol. 2005(2), pages 147-162.
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