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Do Government Audits Reduce Corruption? Estimating the Impacts of Exposing Corrupt Politicians

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  • Eric Avis
  • Claudio Ferraz
  • Frederico Finan

Abstract

Political corruption is considered a major impediment to economic development, and yet it remains pervasive throughout the world. This paper examines the extent to which government audits of public resources can reduce corruption by enhancing political and judiciary accountability. We do so in the context of Brazil’s anti-corruption program, which randomly audits municipalities for their use of federal funds. We find that being audited in the past reduces future corruption by 8 percent, while also increasing the likelihood of experiencing a subsequent legal action by 20 percent. We interpret these reduced-form findings through a political agency model, which we structurally estimate. Based on our estimated model, the reduction in corruption comes mostly from the audits increasing the perceived threat of the non-electoral costs of engaging in corruption.

Suggested Citation

  • Eric Avis & Claudio Ferraz & Frederico Finan, 2016. "Do Government Audits Reduce Corruption? Estimating the Impacts of Exposing Corrupt Politicians," NBER Working Papers 22443, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:22443
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    1. repec:eee:pubeco:v:165:y:2018:i:c:p:201-216 is not listed on IDEAS
    2. Cavalcanti, Francisco & Daniele, Gianmarco & Galletta, Sergio, 2018. "Popularity shocks and political selection," Journal of Public Economics, Elsevier, vol. 165(C), pages 201-216.
    3. Ilaria De Angelis & Guido de Blasio & Lucia Rizzica, 2018. "On the unintended effects of public transfers: evidence from EU funding to Southern Italy," Temi di discussione (Economic working papers) 1180, Bank of Italy, Economic Research and International Relations Area.
    4. Diogo Britto & Stefano Fiorin, 2016. "Corruption and Legislature Size: Evidence from Brazil," DISCE - Working Papers del Dipartimento di Economia e Finanza def054, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    5. Framcisco Cavalcanti & Gianmarco Daniele & Sergio Galletta, 2016. "Popularity shocks and political selection : the effects of anti-corruption audits on candidates' quality," IdEP Economic Papers 1607, USI Università della Svizzera italiana.

    More about this item

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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