Political Corruption and Development in Brazil: Do Random Audits of Corruption Increase Economic Activity?

69 Pages Posted: 18 Dec 2018 Last revised: 19 Apr 2021

See all articles by Jamie Bologna Pavlik

Jamie Bologna Pavlik

Texas Tech University - Department of Agricultural and Applied Economics

Kaitlyn Harger

West Virginia University; Florida Gulf Coast University

Date Written: October 25, 2019

Abstract

The government of Luiz Inácio Lula da Silva implemented a random audits program aimed at curbing municipal corruption in 2003. Recent literature found evidence that these audits successfully reduced corruption (Avis, Ferraz, and Finan 2018) and improved firm performance (Colonnelli and Prem 2017). These latter findings are obtained using survey data concerning formal activity alone. However, many formal firms operate partially “off the books”. Further, these audits likely affect citizen tolerance for corruption in general potentially affecting other facets of governance including informality enforcement. This has its own consequence on economic growth. Thus, an analysis including all forms of economic activity is warranted. We utilize difference-in-difference and matching techniques in conjunction with broad measures of total economic activity to test if audited municipalities improved relative to their non-audited counterparts. We find evidence of a slight decline in subsequent economic activity; we find no evidence of any benefit. A preliminary analysis suggests that this decline may stem from increased informality enforcement.

Keywords: Corruption, Development, Informal Economy

JEL Classification: D73, O1

Suggested Citation

Bologna Pavlik, Jamie and Harger, Kaitlyn, Political Corruption and Development in Brazil: Do Random Audits of Corruption Increase Economic Activity? (October 25, 2019). Available at SSRN: https://ssrn.com/abstract=3277998 or http://dx.doi.org/10.2139/ssrn.3277998

Jamie Bologna Pavlik (Contact Author)

Texas Tech University - Department of Agricultural and Applied Economics ( email )

Suite 167, 2625 Memorial Circle
TTU Administration
Lubbock, TX 79409
United States

Kaitlyn Harger

West Virginia University ( email )

PO Box 6025
Morgantown, WV 26506
United States

Florida Gulf Coast University ( email )

10485 FGCU Blvd S
Ft. Myers, FL 33965-6565
United States

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