IDEAS home Printed from https://ideas.repec.org/p/cge/wacage/423.html
   My bibliography  Save this paper

Electoral Competition and Corruption: Theory and Evidence from India

Author

Listed:
  • Afridi, Farzana

    (Indian Statistical Institute, Delhi and IZA, Bonn)

  • Dhillon, Amrita

    (Kings College London)

  • Solan, Eilon

    (Tel Aviv University)

Abstract

In developing countries with weak enforcement, there is implicitly a large reliance on re-election incentives to reduce corruption. In this paper we extend existing models of post-election accountability with pure moral hazard to incorporate heterogeneous voters. In contrast to this existing literature, we show that electoral discipline is a weak instrument for improving accountability in a majoritarian voting system. More specifically, our model predicts that not only does corruption increase with competition under some conditions, but that the only type of corruption that is responsive to electoral competition is one where voters lose private benefits from the corruption, while corruption in public goods is not responsive. Consistent with these hypotheses, novel panel data on village level audits of one of India’s largest rural public works program suggest a U-shaped relationship between electoral competition and corruption, and responsiveness of corruption only in the private benefits of the program to competition. Our findings highlight the importance of credible penalties and the need for policy interventions that reduce pilferage in the public component of welfare programs, which entail larger welfare losses to citizens.

Suggested Citation

  • Afridi, Farzana & Dhillon, Amrita & Solan, Eilon, 2019. "Electoral Competition and Corruption: Theory and Evidence from India," CAGE Online Working Paper Series 423, Competitive Advantage in the Global Economy (CAGE).
  • Handle: RePEc:cge:wacage:423
    as

    Download full text from publisher

    File URL: https://warwick.ac.uk/fac/soc/economics/research/centres/cage/manage/publications/423-2019_dhillon.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Paul Niehaus & Sandip Sukhtankar, 2013. "Corruption Dynamics: The Golden Goose Effect," American Economic Journal: Economic Policy, American Economic Association, vol. 5(4), pages 230-269, November.
    2. Farzana Afridi & Vegard Iversen & M. R. Sharan, 2017. "Women Political Leaders, Corruption, and Learning: Evidence from a Large Public Program in India," Economic Development and Cultural Change, University of Chicago Press, vol. 66(1), pages 1-30.
    3. Jakob Svensson, 2005. "Eight Questions about Corruption," Journal of Economic Perspectives, American Economic Association, vol. 19(3), pages 19-42, Summer.
    4. Aidt, T. & Golden, M. A. & Tiwari, D., 2011. "Incumbents and Criminals in the Indian National Legislature," Cambridge Working Papers in Economics 1157, Faculty of Economics, University of Cambridge.
    5. Banerjee, Abhijit V. & Pande, Rohini, 2007. "Parochial Politics: Ethnic Preferences and Politician Corruption," Working Paper Series rwp07-031, Harvard University, John F. Kennedy School of Government.
    6. Svaleryd, Helena & Vlachos, Jonas, 2009. "Political rents in a non-corrupt democracy," Journal of Public Economics, Elsevier, vol. 93(3-4), pages 355-372, April.
    7. Jo Thori Lind & Halvor Mehlum, 2010. "With or Without U? The Appropriate Test for a U‐Shaped Relationship," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 72(1), pages 109-118, February.
    8. Afridi, Farzana & Iversen, Vegard, 2014. "Social Audits and MGNREGA Delivery: Lessons from Andhra Pradesh," India Policy Forum, National Council of Applied Economic Research, vol. 10(1), pages 297-341.
    9. repec:nca:ncaerj:v:10:y:2014:i:1:p:297-341 is not listed on IDEAS
    10. Kaivan Munshi & Mark Rosenzweig, 2015. "Insiders and Outsiders: Local Ethnic Politics and Public Goods Provision," NBER Working Papers 21720, National Bureau of Economic Research, Inc.
    11. Sukhtankar, Sandip & Vaishnav, Milan, 2015. "Corruption in India: Bridging Research Evidence and Policy Options," India Policy Forum, National Council of Applied Economic Research, vol. 11(1), pages 193-276.
    12. Daron Acemoglu & Matthew O. Jackson, 2015. "History, Expectations, and Leadership in the Evolution of Social Norms," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 82(2), pages 423-456.
    13. Torsten Persson & Gérard Roland & Guido Tabellini, 1997. "Separation of Powers and Political Accountability," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 1163-1202.
    14. Michele Polo, "undated". "Electoral competition and political rents," Working Papers 144, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    15. Benjamin A. Olken & Rohini Pande, 2012. "Corruption in Developing Countries," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 479-509, July.
    16. John Ferejohn, 1986. "Incumbent performance and electoral control," Public Choice, Springer, vol. 50(1), pages 5-25, January.
    17. Saul Pleeter & John T. Warner, 2001. "The Personal Discount Rate: Evidence from Military Downsizing Programs," American Economic Review, American Economic Association, vol. 91(1), pages 33-53, March.
    18. Timothy Besley & Torsten Persson & Daniel M. Sturm, 2010. "Political Competition, Policy and Growth: Theory and Evidence from the US," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(4), pages 1329-1352.
    19. Robert Barro, 1973. "The control of politicians: An economic model," Public Choice, Springer, vol. 14(1), pages 19-42, March.
    20. Claudio Ferraz & Frederico Finan, 2011. "Electoral Accountability and Corruption: Evidence from the Audits of Local Governments," American Economic Review, American Economic Association, vol. 101(4), pages 1274-1311, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Satya R. Chakravarty & Manipushpak Mitra & Suresh Mutuswami & Rupayan Pal, 2020. "On the probability ratio index as a measure of electoral competition," Palgrave Communications, Palgrave Macmillan, vol. 6(1), pages 1-6, December.
    2. Das, Sabyasachi & Dutta, Souvik & Sarkar, Abhirup, 2021. "Political economy of third party interventions," Journal of Public Economics, Elsevier, vol. 195(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Afridi, Farzana & Dhillon, Amrita & Solan, Eilon, 2016. "Exposing Corruption: Can Electoral Competition Discipline Politicians?," IZA Discussion Papers 10396, Institute of Labor Economics (IZA).
    2. Farzana Afridi, & Sourav Bhattacharya, & Amrita Dhillon, & Eilon Solan,, 2021. "Electoral Competition, Accountability and Corruption:Theory and Evidence from India," CAGE Online Working Paper Series 569, Competitive Advantage in the Global Economy (CAGE).
    3. Hélène Laurent, 2021. "Corruption and politicians’ horizon," Economics of Governance, Springer, vol. 22(1), pages 65-91, March.
    4. George Ward, 2015. "Is Happiness a Predictor of Election Results?," CEP Discussion Papers dp1343, Centre for Economic Performance, LSE.
    5. Sabyasachi Das & Abhiroop Mukhopadhyay & Rajas Saroy, 2018. "Does Affirmative Action in Politics Hinder Performance? Evidence from India," Working Papers 1007, Ashoka University, Department of Economics.
    6. Ward, George, 2015. "Is happiness a predictor of election results?," LSE Research Online Documents on Economics 61698, London School of Economics and Political Science, LSE Library.
    7. Das, Sabyasachi & Mukhopadhyay, Abhiroop & Saroy, Rajas, 2023. "Does affirmative action in politics hinder performance? Evidence from India," Journal of Economic Behavior & Organization, Elsevier, vol. 214(C), pages 370-405.
    8. Das, Sabyasachi & Mukhopadhyay, Abhiroop & Saroy, Rajas, 2017. "Efficiency Consequences of Affirmative Action in Politics: Evidence from India," IZA Discussion Papers 11093, Institute of Labor Economics (IZA).
    9. Jeong, Dahyeon & Shenoy, Ajay & Zimmermann, Laura V., 2023. "De Jure versus De Facto transparency: Corruption in local public office in India," Journal of Public Economics, Elsevier, vol. 221(C).
    10. Benito, Bernardino & Guillamón, María-Dolores & Ríos, Ana-María & Bastida, Francisco, 2018. "Can salaries and re-election prevent political corruption? An empirical evidence," Revista de Contabilidad - Spanish Accounting Review, Elsevier, vol. 21(1), pages 19-27.
    11. Persson, Torsten & Tabellini, Guido, 2002. "Political economics and public finance," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 3, chapter 24, pages 1549-1659, Elsevier.
    12. Britto, Diogo G.C. & Fiorin, Stefano, 2020. "Corruption and legislature size: Evidence from Brazil," European Journal of Political Economy, Elsevier, vol. 65(C).
    13. Persson, Torsten & Tabellini, Guido, 1999. "The size and scope of government:: Comparative politics with rational politicians," European Economic Review, Elsevier, vol. 43(4-6), pages 699-735, April.
    14. Prakash, Nishith & Rockmore, Marc & Uppal, Yogesh, 2019. "Do criminally accused politicians affect economic outcomes? Evidence from India," Journal of Development Economics, Elsevier, vol. 141(C).
    15. Armand, Alex & Coutts, Alexander & Vicente, Pedro C. & Vilela, Inês, 2023. "Measuring corruption in the field using behavioral games," Journal of Public Economics, Elsevier, vol. 218(C).
    16. Leif Helland & Lars Monkerud, 2013. "Electoral agency in the lab: Learning to throw out the rascals," Journal of Theoretical Politics, , vol. 25(2), pages 214-233, April.
    17. Enriqueta Aragonès & Javier Rivas & Áron Tóth, 2019. "Voter Heterogeneity and Political Corruption," Working Papers 1121, Barcelona School of Economics.
    18. Julia Cage, 2009. "Asymmetric information, rent extraction and aid efficiency," PSE Working Papers halshs-00575055, HAL.
    19. Maximiliano Lauletta & Martín A. Rossi & Christian A. Ruzzier, 2022. "Audits and Government Hiring Practices," Economica, London School of Economics and Political Science, vol. 89(353), pages 214-227, January.
    20. Marcus Drometer, 2012. "Bureaucrats and short-term politics," Public Choice, Springer, vol. 151(1), pages 149-163, April.

    More about this item

    Keywords

    Corruption; Electoral Competition; Audit; Accountability; Moral Hazard. JEL Classification: D72; D82; H75; O43; C72.;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cge:wacage:423. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Jane Snape (email available below). General contact details of provider: https://edirc.repec.org/data/dewaruk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.