Monitoring Corruption: Evidence from a Field Experiment in Indonesia

49 Pages Posted: 3 Feb 2006 Last revised: 14 Aug 2010

See all articles by Benjamin A. Olken

Benjamin A. Olken

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER); Harvard University - Society of Fellows

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Date Written: November 2005

Abstract

This paper uses a randomized field experiment to examine several approaches to reducing corruption. I measure missing expenditures in over 600 village road projects in Indonesia by having engineers independently estimate the prices and quantities of all inputs used in each road, and then comparing these estimates to villages' official expenditure reports. I find that announcing an increased probability of a government audit, from a baseline of 4 percent to 100 percent, reduced missing expenditures by about 8 percentage points, more than enough to make these audits cost-effective. By contrast, I find that increasing grass-roots participation in the monitoring process only reduced missing wages, with no effect on missing materials expenditures. Since materials account for three-quarters of total expenditures, increasing grass-roots participation had little impact overall. The findings suggest that grass-roots monitoring may be subject to free-rider problems. Overall, the results suggest that traditional top-down monitoring can play an important role in reducing corruption, even in a highly corrupt environment.

Suggested Citation

Olken, Benjamin A., Monitoring Corruption: Evidence from a Field Experiment in Indonesia (November 2005). NBER Working Paper No. w11753. Available at SSRN: https://ssrn.com/abstract=847025

Benjamin A. Olken (Contact Author)

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