More on Corruption in the Public Sector

This time the relationship between elections and corruption. Suprise surprise, but elected officials respond to incentives, too:

We show that political institutions affect corruption levels. We use corruption audit reports in Brazil to construct new measures of political corruption in local governments and test whether electoral accountability affects the corruption practices of incumbent politicians. We find significantly less corruption in municipalities where mayors can get reelected. Mayors with re-election incentives misappropriate 27 percent fewer resources than mayors without re-election incentives. These effects are more pronounced among municipalities with less access to information and where the likelihood of judicial punishment is lower. Overall our findings suggest that electoral rules that enhance political accountability play a crucial role in constraining politician’s corrupt behavior.

Great paper, and in the June 2011 issue of the American Economic Review.