Monitoring Corruption: Evidence from a Field Experiment in Indonesia

Benjamin Olken

No 11753, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: D73 (search for similar items in EconPapers)
Date: 2005-11
New Economics Papers: this item is included in nep-dev, nep-exp, nep-reg and nep-sea
Note: PE
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Citations: View citations in EconPapers (57)

Published as Olken, Benjamin. "Monitoring Corruption: Evidence from a Field Experiment in Indonesia." Journal of Political Economy 115, 2 (April 2007): 200-249.

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Journal Article: Monitoring Corruption: Evidence from a Field Experiment in Indonesia (2007)
Working Paper: Monitoring corruption: Evidence from a field experiment in indonesia (2005)
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