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Corruption

  • Abhijit Banerjee
  • Sendhil Mullainathan
  • Rema Hanna

In this paper, we provide a new framework for analyzing corruption in public bureaucracies. The standard way to model corruption is as an example of moral hazard, which then leads to a focus on better monitoring and stricter penalties with the eradication of corruption as the final goal. We propose an alternative approach which emphasizes why corruption arises in the first place. Corruption is modeled as a consequence of the interaction between the underlying task being performed by bureaucrat, the bureaucrat's private incentives and what the principal can observe and control. This allows us to study not just corruption but also other distortions that arise simultaneously with corruption, such as red-tape and ultimately, the quality and efficiency of the public services provided, and how these outcomes vary depending on the specific features of this task. We then review the growing empirical literature on corruption through this perspective and provide guidance for future empirical research.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17968.

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Date of creation: Apr 2012
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Publication status: published as “Corruption,” (with Rema Hanna and Sendhil Mullainathan), The Handbook of Organizational Economics. Ed. Robert Gibbons and John Roberts. Princeton University Press, 1109-­‐1147, 2012.
Handle: RePEc:nbr:nberwo:17968
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  7. Bandiera, Oriana & Prat, Andrea & Valletti, Tommaso, 2008. "Active and Passive Waste in Government Spending: Evidence from a Policy Experiment," CEPR Discussion Papers 6799, C.E.P.R. Discussion Papers.
  8. Mark Duggan & Steven D. Levitt, 2002. "Winning Isn't Everything: Corruption in Sumo Wrestling," American Economic Review, American Economic Association, vol. 92(5), pages 1594-1605, December.
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  17. Di Tella, Rafael & Schargrodsky, Ernesto, 2003. "The Role of Wages and Auditing during a Crackdown on Corruption in the City of Buenos Aires," Journal of Law and Economics, University of Chicago Press, vol. 46(1), pages 269-92, April.
  18. Timothy Besley & Rohini Pande & Vijayendra Rao, 2005. "Participatory Democracy in Action: Survey Evidence from South India," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 648-657, 04/05.
  19. Abhijit Banerjee & Angus Deaton & Esther Duflo, 2004. "Health care delivery in rural rajasthan," Framed Field Experiments 00120, The Field Experiments Website.
  20. Guriev, Sergei, 2004. "Red tape and corruption," Journal of Development Economics, Elsevier, vol. 73(2), pages 489-504, April.
  21. Pande, Rohini, 2007. "Understanding Political Corruption in Low Income Countries," Working Paper Series rwp07-020, Harvard University, John F. Kennedy School of Government.
  22. Benjamin Olken, 2005. "Monitoring corruption: Evidence from a field experiment in indonesia," Natural Field Experiments 00317, The Field Experiments Website.
  23. Olken, Benjamin A., 2006. "Corruption and the costs of redistribution: Micro evidence from Indonesia," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 853-870, May.
  24. Duflo, Esther & Hanna, Rema & Ryan, Stephen, 2008. "Monitoring Works: Getting Teachers to Come to School," CEPR Discussion Papers 6682, C.E.P.R. Discussion Papers.
  25. Chang-Tai Hsieh & Enrico Moretti, 2005. "Did Iraq Cheat the United Nations? Underpricing, Bribes, and the Oil for Food Program," NBER Working Papers 11202, National Bureau of Economic Research, Inc.
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  38. Naci Mocan, 2004. "What Determines Corruption? International Evidence from Micro Data," NBER Working Papers 10460, National Bureau of Economic Research, Inc.
  39. Jakob Svensson, 2005. "Eight Questions about Corruption," Journal of Economic Perspectives, American Economic Association, vol. 19(3), pages 19-42, Summer.
  40. Martina Björkman & Jakob Svensson, 2009. "Power to the People: Evidence from a Randomized Field Experiment on Community-Based Monitoring in Uganda," The Quarterly Journal of Economics, MIT Press, vol. 124(2), pages 735-769, May.
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