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Audit risk and rent extraction: Evidence from a randomized evaluation in Brazil

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  • Stephan Litschig
  • Yves Zamboni

Abstract

We report results from a randomized policy experiment designed to test whether increased audit risk deters rent extraction in local public procurement and service delivery in Brazil. Our estimates suggest that temporarily increasing annual audit risk by about 20 percentage points reduced the proportion of irregular local procurement processes by about 17 percentage points. This reduction was driven entirely by irregularities involving mismanagement or corruption. In contrast, we find no evidence that increased audit risk affected the quality of publicly provided preventive and primary health care services -measured based on user satisfaction surveys- or compliance with national regulations of the conditional cash transfer program "Bolsa Família".

Suggested Citation

  • Stephan Litschig & Yves Zamboni, 2011. "Audit risk and rent extraction: Evidence from a randomized evaluation in Brazil," Economics Working Papers 1270, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 2013.
  • Handle: RePEc:upf:upfgen:1270
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    References listed on IDEAS

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    1. Oriana Bandiera & Andrea Prat & Tommaso Valletti, 2009. "Active and Passive Waste in Government Spending: Evidence from a Policy Experiment," American Economic Review, American Economic Association, vol. 99(4), pages 1278-1308, September.
    2. Miriam A. Golden & Lucio Picci, 2005. "Proposal For A New Measure Of Corruption, Illustrated With Italian Data," Economics and Politics, Wiley Blackwell, vol. 17, pages 37-75, March.
    3. 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.
    4. Stephan Litschig & Yves Zamboni, 2008. "Judicial presence and rent extraction," Economics Working Papers 1143, Department of Economics and Business, Universitat Pompeu Fabra, revised Dec 2012.
    5. Ritva Reinikka & Jakob Svensson, 2004. "Local Capture: Evidence from a Central Government Transfer Program in Uganda," The Quarterly Journal of Economics, Oxford University Press, vol. 119(2), pages 679-705.
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. How to reduce public procurement waste
      by Economic Logician in Economic Logic on 2012-09-05 19:49:00
    2. Random audits to reduce misappropriation of public resources
      by Economic Logician in Economic Logic on 2012-09-06 19:22:00

    Citations

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    Cited by:

    1. repec:eee:wdevel:v:105:y:2018:i:c:p:171-188 is not listed on IDEAS
    2. Galletta, Sergio, 2017. "Law enforcement, municipal budgets and spillover effects: Evidence from a quasi-experiment in Italy," Journal of Urban Economics, Elsevier, vol. 101(C), pages 90-105.
    3. Timmons, Jeffrey F. & Garfias, Francisco, 2015. "Revealed Corruption, Taxation, and Fiscal Accountability: Evidence from Brazil," World Development, Elsevier, vol. 70(C), pages 13-27.
    4. Muralidharan, Karthik & Das, Jishnu & Holla, Alaka & Mohpal, Aakash, 2017. "The fiscal cost of weak governance: Evidence from teacher absence in India," Journal of Public Economics, Elsevier, vol. 145(C), pages 116-135.
    5. Gerardino, Maria Paula & Litschig, Stephan & Pomeranz, Dina, 2017. "Can Audits Backfire? Evidence from Public Procurement in Chile," CEPR Discussion Papers 12529, C.E.P.R. Discussion Papers.
    6. Eric Avis & Claudio Ferraz & Frederico Finan, 2016. "Do Government Audits Reduce Corruption? Estimating the Impacts of Exposing Corrupt Politicians," Textos para discussão 652, Department of Economics PUC-Rio (Brazil).
    7. Stephan Litschig & Yves Zamboni, 2008. "Judicial presence and rent extraction," Economics Working Papers 1143, Department of Economics and Business, Universitat Pompeu Fabra, revised Dec 2012.
    8. 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.
    9. Horacio A. Larreguy & John Marshall & James M. Snyder, Jr., 2014. "Revealing Malfeasance: How Local Media Facilitates Electoral Sanctioning of Mayors in Mexico," NBER Working Papers 20697, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Corruption; Rents; Local Governments; Law Enforcement;

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • 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

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