Corruption is a public enemy. Brazil’s ongoing Lava Jato scandal is only the most recent prominent example of what can happen when government expenditures are undertaken with insufficient transparency and accountability.
Pointing out a problem is one thing. Learning how to solve it—or at least contain it—is a different issue altogether, and one that raises a variety of questions. For instance, how should finite resources be used to monitor public works? Moreover, who should be involved in monitoring, and in what role? Individual citizens are affected by corruption, but many lack the time or skills for monitoring. Civil society organizations (CSOs) often have a keen interest in monitoring government activities, but lack enforcement powers. Government agencies involved in enforcement, on the other hand, often lack resources for monitoring.
Columbia University researcher and former IDB visiting scholar Paul Lagunes has explored what happens when both a CSO and a national government agency inform local governments that their use of federal funds in infrastructure projects is being watched. He presented the findings of a field experiment he conducted in a Dec. 1 DC Political Economy Seminar at the IDB, co-sponsored by the Research Department and the Institutions for Development division.
The experiment itself is straightforward—and relatively inexpensive. In the first of two stages, undertaken from August of 2015 until May of 2017, officials in randomly selected districts throughout Peru received a letter stating that their spending on the execution of small infrastructure projects (e.g. roads, sidewalks, basketball-type courts) funded by the National Housing Ministry was monitored. This letter was sent by Proética, a CSO that serves as Peru’s chapter of Transparency International and is demonstrably independent of the country’s government. Shortly thereafter, district officials received a second letter from the national government’s auditor, the Controloría General de la República, notifying them that it was aware of Proética’s monitoring activities. A second stage consisted of a follow-up letter from Proética, then one from the Controloría, reminding the district that monitoring continued.
This seemingly small intervention yielded big results. Projects in treated districts (i.e., districts that received the letters) had a 51% reduction in construction costs compared to projects in control group districts (i.e., comparable districts that did not receive the letters). The reduction, moreover, occurred without any perceptible change in quality. This was verified by the researcher and the collaborating CSO who examined the conditions of some of the public works that received the intervention, in some cases using satellite pictures such as those available from Google Earth. It thus seems likely that cost reductions in infrastructure, which are vulnerable to corruption around the world, were achieved by curtailing dubious outlays.
Moreover, no spillover effects occurred across districts. In fact, awareness of being watched in one area appeared to have a chilling effect on malfeasance in others.
What lessons can policymakers and the public at large draw from this study? Most importantly, when CSOs and government agencies combine their anti-corruption efforts, the resulting social benefits significantly outweigh the costs. Achieving such cooperation represents an ongoing challenge: Mutual relations are often tense and even conflictual. However, when collaboration occurs, as the study shows, corruption takes a serious hit.