Working Paper: NBER ID: w11753
Authors: Benjamin A. Olken
Abstract: This paper uses a randomized field experiment to examine several approaches to reducing corruption. I measure missing expenditures in over 600 village road projects in Indonesia by having engineers independently estimate the prices and quantities of all inputs used in each road, and then comparing these estimates to villages' official expenditure reports. I find that announcing an increased probability of a government audit, from a baseline of 4 percent to 100 percent, reduced missing expenditures by about 8 percentage points, more than enough to make these audits cost-effective. By contrast, I find that increasing grass-roots participation in the monitoring process only reduced missing wages, with no effect on missing materials expenditures. Since materials account for three-quarters of total expenditures, increasing grass-roots participation had little impact overall. The findings suggest that grass-roots monitoring may be subject to free-rider problems. Overall, the results suggest that traditional top-down monitoring can play an important role in reducing corruption, even in a highly corrupt environment.
Keywords: Corruption; Field Experiment; Indonesia
JEL Codes: D73
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increasing the probability of a government audit from 4% to 100% (H83) | reduction of missing expenditures (H72) |
| audits were particularly effective in villages where the village head was up for reelection (D72) | interaction between monitoring and democratic accountability (D72) |
| grassroots participation through invitations and comment forms (D72) | increased community involvement (O35) |
| grassroots participation through invitations and comment forms (D72) | statistically insignificant overall effect on missing expenditures (H59) |
| grassroots monitoring may reduce missing labor expenditures (J46) | nuanced relationship between community engagement and corruption outcomes (H57) |