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Monitoring Corruption:* - psflibrary.org

Monitoring Corruption:* - psflibrary.org

Monitoring Corruption:* -

Monitoring Corruption: *Evidence from a Field Experiment in IndonesiaBenjamin A. OlkenNBERNovember 2004ABSTRACTThis paper uses a randomized field experiment to examine several approaches to reducingcorruption. I measure corruption in over 600 village road projects in Indonesia by havingengineers independently estimate the prices and quantities of all inputs used in each road, and thencomparing these estimates to villages’ official expenditure reports. I find that announcing anincreased probability of a government audit, from a baseline of 4 percent to 100 percent, reducestheft from the project by about 8 percent of expenditures. I estimate that these audits are costeffective.By contrast, I find that increasing grass-roots participation in the monitoring processreduced theft of villagers’ wages, but that this was almost entirely offset by correspondingincreases in theft of materials. This suggests that grass-roots monitoring may be more effective inreducing theft when community members have substantial private stakes in the outcome, but lesseffective for public goods. Overall, the results suggest that traditional top-down monitoring canplay an important role in reducing corruption, even in a highly corrupt environment.* I wish to thank Alberto Alesina, Abhijit Banerjee, Robert Barro, Francesco Caselli, Joe Doyle, Esther Duflo, Amy Finkelstein,Brian Jacob, Seema Jayachandran, Ben Jones, Larry Katz, Michael Kremer, Jeff Liebman, Erzo Luttmer, Lant Pritchett, andMark Rosenzweig for helpful comments. Special thanks are due to Victor Bottini, Richard Gnagey, Susan Wong, and especiallyto Scott Guggenheim for their support and assistance throughout the project. The field work and engineering survey would havebeen impossible without the dedication of Faray Muhammad and Suroso Yoso Oetomo, as well as the entire P4 field staff. Thisproject was supported by a grant from the DfID-World Bank Strategic Poverty Partnership Trust Fund. All views expressed arethose of the author, and do not necessarily reflect the opinions of DfID or the World Bank. Email: bolken@nber.org

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