Unintended Consequences of Anti-Corruption Strategies
46 Pages Posted: 9 Aug 2021 Last revised: 8 Mar 2022
Date Written: March 07, 2022
Fighting corruption in one sector may improve overall governance but may also shift rent extraction activities to less scrutinized sectors. This paper highlights such unintended consequences of a federal anti-corruption strategy in Brazil by documenting the causal effects of randomized fiscal audits on deforestation dynamics, a non-targeted outcome. Between 2003 and 2011, public audits of federal funds increased deforestation by about 10% in municipalities of the Brazilian Amazon within the first three years after the audit. Municipalities seem also to have learned from neighboring audits, which affected deforestation outcomes in a similar way to own audits. The audit effects doubled among first-term mayors who managed to win re-elections afterward, suggesting the potential presence of electoral benefits to such strategies.
Keywords: Deforestation, corruption, fiscal audits, Brazil, Amazonas
JEL Classification: D73, O13, Q23
Suggested Citation: Suggested Citation