The Handa Center would like to invite you to attend a seminar on Corruption in Public Spending: Measuring Theft and Bribery with Dr. Desiree Desierto, Handa Center Research Fellow.
Corruption in the allocation of public funds can come both from the revenue and the expenditure side - a public official can steal government revenues or receive bribe payments in exchange for spending those revenues. The rents from theft and those from bribes can cancel each other out because the revenues that are stolen are therefore not spent on providing public goods and services from which bribe payments could have been extracted. Thus, without decomposing total corruption into theft and bribery, it might appear that there is no corruption. To provide evidence thereof, I propose a structural approach in which the direct effect of government revenues on the public official's total rents measures theft, while its indirect effect through spending measures bribery. I then demonstrate the method using municipal-level data from the Philippines. Results initially suggest that an increase in government revenues decreases corruption. However, decomposition reveals that higher revenues actually increase theft, but the foregone spending decreases the equilibrium amount of bribe payments to a sufficiently large extent such that total corruption decreases.
Dr. Desiree A. Desierto specializes in the political economy of development. After obtaining an MSc in Development Economics from the University of Oxford and a PhD in Economics from the University of Nottingham, she became Robert M. Solow Postdoctoral Fellow at the Cournot Centre in Economic Studies in France, Visiting Scholar at the University of Cambridge, and Associate Professor at the University of the Philippines. Desiree is currently a PhD candidate in Political Science at the University of Wisconsin-Madison. Her dissertation, “The Great Development Tradeoff: Corruption vs. Public Goods”, argues that while government spending can decrease rent-seeking and corruption by appropriating revenues toward public good provision, it can also increase it since government contracts that supply the public goods may be awarded in exchange for bribes. In analyzing the conditions under which the latter effect outweighs the former, the dissertation shows why it is difficult for developing countries to outspend poverty without having institutions that curb opportunities for rent-seeking.
Please note this event is followed by the inagural Handa Center Annual Lecture on the Rule of Law: America's Travails with Democracy and the Rule of Law as a Mirror of Global Retreat, Featuring Thomas Carothers at 4:30pm in Encina Hall, 616 Serra St., WJP Conference Room, 2nd Floor.