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The Ways of Corruption in Infrastructure: Lessons from the Odebrecht Case

Author

Listed:
  • Nicolás Campos
  • Eduardo Engel
  • Ronald D. Fischer
  • Alexander Galetovic

Abstract

In 2016, the Brazilian construction firm Odebrecht was fined 2.6 billion USD by the US Department of Justice. It was the largest corruption case ever prosecuted under the US Foreign Corrupt Practices Act. Our examination of judicial documents and media reports on this case provides new insights on the workings of corruption in the infrastructure sector. Odebrecht paid bribes for two reasons: to tailor the terms of the auction in its favor, as well as to obtain favorable terms in contract renegotiations. In projects where Odebrecht paid bribes, costs increased by 70.8 percent on average, compared with 5.6 percent for projects with no bribes. We also find that bribes and profits made from bribing were smaller than documented in most previous studies, in the range of one to two percent of the cost of a project.

Suggested Citation

  • Nicolás Campos & Eduardo Engel & Ronald D. Fischer & Alexander Galetovic, 2021. "The Ways of Corruption in Infrastructure: Lessons from the Odebrecht Case," Journal of Economic Perspectives, American Economic Association, vol. 35(2), pages 171-190, Spring.
    • Handle: RePEc:aea:jecper:v:35:y:2021:i:2:p:171-90
    DOI: 10.1257/jep.35.2.171
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    Citations

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    Cited by:

    1. Leandro Arozamena & Federico Weinschelbaum & Juan-José Ganuza, 2021. "Renegotiation and Discrimination in Symmetric Procurement Auctions," Department of Economics Working Papers 2021_09, Universidad Torcuato Di Tella.
    2. Lisciandra Maurizio & Miralles Asensio Antonio & Monteforte Fabio, 2024. "Search and Matching in Political Corruption," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 24(1), pages 69-96, January.
    3. Gonzalez, Felipe & Miquel-Florensa, Josepa & Prem, Mounu & Straub, Stéphane, 2022. "The Dark Side of Infrastructure: Roads, Repression, and Land in Authoritarian Paraguay," SocArXiv zetmq, Center for Open Science.
    4. Romano, Patrícia Ribeiro & Bezerra Sampaio, Raquel Menezes, 2023. "Road concessions: Evidence of the effects of improving the transport infrastructure on economic development in Brazil," Transport Policy, Elsevier, vol. 142(C), pages 115-124.
    5. Engel,Eduardo & Ferrari,Martín & Fischer,Ronald & Galetovic,Alexander, 2022. "Managing the Fiscal Risks Wrought by PPPs : A Simple Framework and Some Lessons from Chile," Policy Research Working Paper Series 10056, The World Bank.
    6. Leandro Arozamena & Juan José Ganuza & Federico Weinschelbaum, 2024. "Corruption and Renegotiation in Procurement," Working Papers 334, Red Nacional de Investigadores en Economía (RedNIE).
    7. Olalekan Charles Okunlola & Imran Usman Sani & Olumide Abiodun Ayetigbo & Olajide O. Oyadeyi, 2024. "Effect of government expenditure on real economic growth in ECOWAS: assessing the moderating role of corruption and conflict," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-15, December.

    More about this item

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L74 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Construction
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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