The Role of Wages and Auditing During a Crackdown on Corruption in the City of Buenos Aires

33 Pages Posted: 19 May 2001

See all articles by Rafael Di Tella

Rafael Di Tella

Harvard Business School - Business, Government and the International Economy Unit; National Bureau of Economic Research (NBER)

Ernesto Schargrodsky

Universidad Torcuato Di Tella

Date Written: June 12, 2001

Abstract

We study the prices paid for basic inputs during a crackdown on corruption in the public hospitals of the city of Buenos Aires, Argentina during 1996-97. We find a well-defined, negative effect on the measures used to capture corruption. Prices paid by hospitals for basic, homogeneous inputs fall by 15% during the first nine months of the crackdown. After this period prices rise, but they are still 10% lower than those prevailing before the crackdown. Relative to the pre-crackdown period, higher wages play no role in inducing lower input prices when audit intensity can be expected to be maximal (during the first phase of the crackdown), but have a negative and well-defined effect when audit intensity takes intermediate levels (the last phase of the crackdown). Controlling for fixed effects, we find that the wage elasticity of input prices exceeds 20%. These results are consistent with the standard model of bribes of Becker and Stigler (1974).

Keywords: Anti-corruption crackdown, efficiency wages, audit, procurement

JEL Classification: K42

Suggested Citation

Di Tella, Rafael and Schargrodsky, Ernesto, The Role of Wages and Auditing During a Crackdown on Corruption in the City of Buenos Aires (June 12, 2001). Available at SSRN: https://ssrn.com/abstract=269490 or http://dx.doi.org/10.2139/ssrn.269490

Rafael Di Tella (Contact Author)

Harvard Business School - Business, Government and the International Economy Unit ( email )

Cambridge, MA
United States
617-495-5048 (Phone)
617-496-5985 (Fax)

HOME PAGE: http://www.people.hbs.edu/rditella/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ernesto Schargrodsky

Universidad Torcuato Di Tella ( email )

Minones 2159
1428 Buenos Aires, 1428
Argentina
+54 11 4784 0080 (Phone)
+54 11 4783 3220 (Fax)

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