Playing Whac-A-Mole in the Fight against Corruption: Evidence from Random Audits in Brazil

Produced by: 
Universidad de San Andrés
Available from: 
September 2021
Paper author(s): 
Maximiliano Lauletta
Christian Ruzzier
Martín A. Rossi
Topic: 
Financial Economics
Year: 
2021

Audits can reduce corruption, but corrupt officials may be able to substitute to alternate forms of corruption when the anticorruption policy controls only certain types of corruption. By exploiting the random assignment of municipalities to a large, successful, audit program in Brazil, we document unintended (and undesirable) consequences of such selective anticorruption monitoring: audited municipalities employ more labor in water provision, and this translates into a more inefficient service. We also provide additional evidence consistent with the idea that local officials may be using their discretion in hiring to substitute between different forms of corruption.

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