NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Monitoring Corruption: Evidence from a Field Experiment in Indonesia

Benjamin A. Olken

NBER Working Paper No. 11753
Issued in November 2005
NBER Program(s):   PE

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.

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Document Object Identifier (DOI): 10.3386/w11753

Published: Olken, Benjamin. "Monitoring Corruption: Evidence from a Field Experiment in Indonesia." Journal of Political Economy 115, 2 (April 2007): 200-249.

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