The Dynamic Effects of Information on Political Corruption: Theory and Evidence from Puerto Rico

Gustavo Bobonis, Luis Cámara Fuertes and Rainer Schwabe

Working Papers from University of Toronto, Department of Economics

Abstract: Does the disclosure of information about corrupt activities induce a sustained reduction in corruption? We use publicly released routine audits of municipal governments in Puerto Rico to answer this question. We first develop a political agency model where voters re-elect incumbents based on their performance while in office. We show that, because voters cannot directly observe incumbents’ actions, an incumbent whose reputation improved in the previous term is likely to engage in more rent-seeking activities in a future term. Guided by this model, we use longitudinal data on audit results to examine the long-term consequences of providing information to voters on levels of political corruption. We find that municipal corruption levels in subsequent audits are on average the same in municipalities audited preceding the previous election and those not audited then. In spite of this, mayors in municipalities audited preceding the previous election have higher re-election rates, suggesting that audits enable voters to select more competent politicians. We conclude that short-term information dissemination policies do not necessarily align politicians’ long-term actions with voter preferences as politicians exploit their reputational gains by extracting more rents from office.

Keywords: corruption; information; political agency; dynamic incentives (search for similar items in EconPapers)
JEL-codes: D72 O12 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2011-05-09
New Economics Papers: this item is included in nep-cdm, nep-cta and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: The Dynamic Effects of Information on Political Corruption: Theory and Evidence from Puerto Rico (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:tor:tecipa:tecipa-428

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