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Exposing Corruption: Can Electoral Competition Discipline Politicians?

Author

Listed:
  • Afridi, Farzana

    () (Indian Statistical Institute)

  • Dhillon, Amrita

    () (King's College London)

  • Solan, Eilon

    () (Tel Aviv University)

Abstract

In developing countries with weak institutions, there is implicitly a large reliance on elections to instill norms of accountability and reduce corruption. In this paper we show that electoral discipline may be ineffective in reducing corruption when political competition is too high or too low. We first build a simple game theoretic model to capture the effect of electoral competition on corruption. We show that in equilibrium, corruption has a U-shaped relationship with electoral competition. If the election is safe for the incumbent (low competition) or if it is extremely fragile (high competition) then corruption is higher, and for intermediate levels of competition, corruption is lower. We also predict that when there are different types of corruption, then incumbents increase corruption in the components that voters care less about regardless of competition. We test the model's predictions using data gathered on audit findings of leakages from a large public program in Indian villages belonging to the state of Andhra Pradesh during 2006-10 and on elections to the village council headship in 2006. Our results largely confirm the theoretical results that competition has a non-linear effect on corruption, and that the impact of electoral competition varies by whether theft is from the public or private component of the service delivery. Overall, our results suggest that over-reliance on elections to discipline politicians is misplaced.

Suggested Citation

  • Afridi, Farzana & Dhillon, Amrita & Solan, Eilon, 2016. "Exposing Corruption: Can Electoral Competition Discipline Politicians?," IZA Discussion Papers 10396, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp10396
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    References listed on IDEAS

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    1. Karthik Muralidharan & Paul Niehaus & Sandip Sukhtankar, 2016. "Building State Capacity: Evidence from Biometric Smartcards in India," American Economic Review, American Economic Association, vol. 106(10), pages 2895-2929, October.
    2. Afridi, Farzana & Iversen, Vegard, 2014. "Social Audits and MGNREGA Delivery: Lessons from Andhra Pradesh," India Policy Forum, National Council of Applied Economic Research, vol. 10(1), pages 297-341.
    3. Saul Pleeter & John T. Warner, 2001. "The Personal Discount Rate: Evidence from Military Downsizing Programs," American Economic Review, American Economic Association, vol. 91(1), pages 33-53, March.
    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. Kaivan Munshi & Mark Rosenzweig, 2015. "Insiders and Outsiders: Local Ethnic Politics and Public Goods Provision," NBER Working Papers 21720, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Bharatee Bhusana, Ferris, J Stephen Dash & Stanley L. Winer, 2018. "Measuring Electoral Competitiveness: With Application to the Indian States," CESifo Working Paper Series 7216, CESifo Group Munich.

    More about this item

    Keywords

    audit; electoral competition; corruption; social accountability;

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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