Strategic Honesty

Apparently, the cynical view that bureaucrats always extract the maximum amount in bribes and other forms of fraud is incorrect. They tend to be a bit more strategic than that. According to a new paper by Paul Niehaus and Sandeep Sukhtankar,

We study dynamic incentives for corruption in one of the world's largest public transfer programs, India's National Rural Employment Guarantee Act. We uncover large-scale embezzlement along multiple margins: theft from beneficiaries and theft from taxpayers. Using changes in statutory program benefits as instruments, we then test a simple, dynamic model of rent extraction. We find evidence for a “golden goose" effect: when expected future opportunities for rent extraction are high, officials extract less rent today in order to preserve tomorrow's opportunities.

Aside from the main conclusion described above, the paper is notable in that it is first effort (to my knowledge) to estimate one form of corruption (labour corruption) in NREGA across an area larger than a single block. While the overall estimates of the incidence of labour corruption are extremely high (you’ll have to read the paper to find out exactly how high), it’s important to remember that this is for an area in Orissa in which social audits had already revealed very high levels of corruption. Further, the fact that Paul and Sandeep are able to get a reasonably accurate estimate of this form of corruption does at least stand as a testament to the transparency measures included in the program.

Lastly, my favourite sentence from the paper:

Hence, out of the original sample of 1; 938 households, we were unable to make attempts to reach 439, mainly due to an incident which caused tensions between a mining company and locals in Rayagada and a polite request by Maoists to not enter certain areas of Koraput.