To serve the community or oneself: the public servant's dilemma

Embezzlement of resources is hampering public service delivery throughout the developing world. Research on this issue is hindered by problems of measurement. To overcome these problems we use an economic experiment to investigate the determinants of corrupt behaviour. We focus on three aspects of behaviour: (i) embezzlement by public servants; (ii) monitoring effort by designated monitors; and, (iii) voting by community members when provided with an opportunity to select a monitor. The experiment allows us to study the effect of wages, effort observability, rules for monitor assignment, and professional norms. Our experimental subjects are Ethiopian nursing students. We find that service providers who earn more embezzle less, although the effect is small. Embezzlement is also lower when observability (associated with the risk of being caught and sanctioned) is high, and when service providers face an elected rather than randomly selected monitor. Monitors put more effort into monitoring, when they face re-election and when the public servant receives a higher wage. Communities re-elect monitors who put more effort into exposing embezzlement. Framing . whereby players are referred to as .health workers. and .community members. rather than by abstract labels . affects neither mean embezzlement nor mean monitoring effort, but significantly increases the variance in both. This suggests that different types of experimental subject respond differently to the framing, possibly because they adhere to different norms.