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American Economic Journal: Economic Policy: Vol. 5 No. 4 (November 2013)

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Corruption Dynamics: The Golden Goose Effect

Article Citation

Niehaus, Paul, and Sandip Sukhtankar. 2013. "Corruption Dynamics: The Golden Goose Effect." American Economic Journal: Economic Policy, 5(4): 230-69.

DOI: 10.1257/pol.5.4.230

Abstract

Theoretical work on disciplining corrupt agents has emphasized the role of expected future rents -- for example, efficiency wages. Yet taken seriously this approach implies that illicit future rents should also deter corruption. We study this "golden goose" effect in the context of a statutory wage increase in India's employment guarantee scheme, comparing official microrecords to original household survey data to measure corruption. We estimate large golden goose effects that reduced the total impact of the wage increase on theft by roughly 64 percent. In short, rent expectations matter. (JEL D73, D82, H83, J41, K42, O17, O21)

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Authors

Niehaus, Paul (U CA, San Diego)
Sukhtankar, Sandip (Dartmouth College)

JEL Classifications

D73: Bureaucracy; Administrative Processes in Public Organizations; Corruption
D82: Asymmetric and Private Information; Mechanism Design
H83: Public Administration; Public Sector Accounting and Audits
J41: Labor Contracts
K42: Illegal Behavior and the Enforcement of Law
O17: Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
O21: Planning Models; Planning Policy

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