Corruption, Intimidation, and Whistle-Blowing: A Theory of Inference from Unverifiable Reports

55 Pages Posted: 24 Jul 2014

See all articles by Sylvain Chassang

Sylvain Chassang

New York University (NYU) - Department of Economics

Gerard Padró i Miquel

London School of Economics & Political Science (LSE); National Bureau of Economic Research (NBER)

Date Written: July 2014

Abstract

We consider a game between a principal, an agent, and a monitor in which the principal would like to rely on messages by the monitor to target intervention against a misbehaving agent. The difficulty is that the agent can credibly threaten to retaliate against likely whistleblowers in the event of an intervention. In this setting intervention policies that are very responsive to the monitor's message provide very informative signals to the agent, allowing him to shut down communication channels. Successful intervention policies must garble the information provided by monitors and cannot be fully responsive. We show that even if hard evidence is unavailable and monitors have heterogeneous incentives to (mis)report, it is possible to establish robust bounds on equilibrium corruption using only non-verifiable reports. Our analysis suggests a simple heuristic to calibrate intervention policies: first get monitors to complain, then scale up enforcement while keeping the information content of intervention constant.

Suggested Citation

Chassang, Sylvain and Padro i Miquel, Gerard, Corruption, Intimidation, and Whistle-Blowing: A Theory of Inference from Unverifiable Reports (July 2014). NBER Working Paper No. w20315. Available at SSRN: https://ssrn.com/abstract=2471208

Sylvain Chassang (Contact Author)

New York University (NYU) - Department of Economics ( email )

19 West 4th Street
New York, NY 10012
United States

Gerard Padro i Miquel

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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