Government Audits

Martina Cuneo, Jetson Leder-Luis and Silvia Vannutelli

No 30975, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: D73 H83 M42 (search for similar items in EconPapers)
Date: 2023-02
New Economics Papers: this item is included in nep-acc and nep-pub
Note: PE POL
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