TY  - JOUR
AU  - Olken,Benjamin A.
TI  - Corruption Perceptions vs. Corruption Reality
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12428
PY  - 2006
Y2  - August 2006
UR  - http://www.nber.org/papers/w12428
L1  - http://www.nber.org/papers/w12428.pdf
N1  - Author contact info:
Benjamin A. Olken
Department of Economics
MIT
50 Memorial Drive
Cambridge, MA  02142-1347
Tel: 617/588-1437
Fax: 617/868-2742
E-Mail: bolken@mit.edu
M2  - featured in NBER digest on 2006-08-14
AB  - This paper examines the accuracy of beliefs about corruption, using data from Indonesian villages. Specifically, I compare villagers%u2019 stated beliefs about the likelihood of corruption in a road-building project in their village with a more objective measure of %u2018missing expenditures%u2019 in the project, which I construct by comparing the projects%u2019 official expenditure reports with an independent estimate of the prices and quantities of inputs used in construction. I find that villagers%u2019 beliefs do contain information about corruption in the road project, and that villagers are sophisticated enough to distinguish between corruption in the road project and other types of corruption in the village. The magnitude of their information, however, is small, in part because officials hide corruption where it is hardest for villagers to detect. This may limit the effectiveness of grass-roots monitoring of local officials. I also find evidence of systematic biases in corruption beliefs, particularly when examining the relationship between corruption and variables correlated with trust. For example, ethnically heterogeneous villages have higher perceived corruption levels but lower actual levels of missing expenditures. The findings illustrate the limitations of relying solely on corruption perceptions, whether in designing anti-corruption policies or in conducting empirical research on corruption.
ER  -