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Government Audits

Author

Listed:
  • Martina Cuneo
  • Jetson Leder-Luis
  • Silvia Vannutelli

Abstract

Audits are a common mechanism used by governments to monitor public spending. In this paper, we discuss the effectiveness of auditing with theory and empirics. In our model, the value of audits depends on both the underlying presence of abuse and the government’s ability to observe it and enforce punishments, making auditing most effective in middling state-capacity environments. Consistent with this theory, we survey all the existing credibly causal studies and show that government audits seem to have positive effects mostly in middle-state-capacity environments like Brazil. We present new empirical evidence from American city governments, a high-capacity and low-impropriety environment. Using a previously unexplored threshold in federal audit rules and a dynamic regression discontinuity framework, we estimate the effects of these audits on American city finance and find no marginal effect of audits.

Suggested Citation

  • Martina Cuneo & Jetson Leder-Luis & Silvia Vannutelli, 2023. "Government Audits," NBER Working Papers 30975, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30975
    Note: PE POL
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    More about this item

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

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