Comments on “The Political Economy of Corruption in the Bureaucracy”

Comments on“The Political Economy of Corruption in the

Bureaucracy”By Michele Valsecchi

Klenio Barbosa

Sao Paulo School of Economics - FGV

SITE’s Corruption Conference

Stockholm/SE - September 1, 2015

Klenio Barbosa (FGV) Comments May 2015 1 / 10

The Paper

Research Question:

Does Reelection Incentives induce politician to deter corruption in thebureaucracy?

Very detailed data (99-04) for Indonesian districts about:

corruption events per district: reported in the prosecution’s filesreelection incentive: district election and politicians’ career (tenure inoffice joint with term limit for each district’s head)

Results:

Reelection incentive does reduce corruption

Effect comes from a reduction in corruption among district’s low staff

⇒ Interpretation: long-horizon politicians monitor more intensively theirstaff in order to deter bureaucracy’s corruption

General Comments

Very interesting paper: I enjoyed reading it!

Reasons

1 Data set: detailed information is used

2 Empirical Strategy: very convincing

it seems to deal with the main potential endogeneity problems

3 Results: main effects are pretty much robust

low district’s bureaucracy effect (in particular)

General Comments

Reasons

General Comments

Reasons

General Comments

Reasons

Major Concerns/Questions

1 Interpretation of the results and contribution

2 Estimation: Reelection effect on the probability of prosecution

3 Reelection Incentives and 2nd Mandate

Major Concern # 1

Interpretation of the results: What is the true story?

Motivation: Reelection provides incentives to the politiciansdeter/monitor corruption among the bureaucracy

However: the results are also compatible with Ferraz and Finan (2011)

Reelection motivation reduces own politician’s corruption

Bureaucracy may act as corrupter to rise benefits for politician

Potential competing stories:

“Politicians monitoring story” versus “Stopping corruption story”

Some results in your favor:

district’s staff: low rank (sign.) and high rank (non sign.) - more is need !!!

Major Concern # 1

Major Concern # 1 (cont.)

Suggestion: Push that further and explore more your data

1 Explore the information in your data on the staff members (profile andcareer path) that were accused of corruption

Appointed staff︸︷︷︸Ferraz and Finan

versus Regular public official︸︷︷︸your story (independent bureaucracy)

2 Explore village’s political structure:

Urban villages: heads are appointed by head’s district

Rural villages: elected

3 Remark: I do not see any strong effect on corruption among villageheads (3 out 8 estimated coefficients are significant)

Major Concern # 2

Estimation: Probability of prosecution and reelection

Discrete-time hazard model:

hit =Pr (prosecution in i at t)

Pr( non prosecution in i ∀t′ < t)= β0 + β12ndMandateit +

∑βjDummy J Yearsit + εit

Figure 3 suggests that Reelection affects the time of the prosecution

Table 5 may suffer from “omitted variable”: biasing reelection’s effect

Alternative specification:

hit = β0+β12ndMandateit+∑

βjDummy J Yearsit+∑

γk2ndMandateit × Dummy J Yearsit+εit

Question: What is the baseline year effect the dummy?

Major Concern # 2

Major Concern # 3

Reelection Incentives and 2nd Mandate

Interpretation of the results relies on assumption that politicians in theirsecond mandate have lower reelection incentive

Questions:Do 2nd mandate politicians retire afterwards?

Don’t they aim to run for higher admin layers: president, provincegovernor?

Districts are important. So, those politicians in 2nd mandate should becompetitive ones that aim to be head of higher administrative layers

Politician career concern (Mattozzi and Merlo, 2008)

If it is the case, how to interpret your results?

Hint: Restrict the sample to politicians that did not run for higheradministrative layers

Major Concern # 3

Minor Comments and Questions

Outcome variable is the number of corruption events.

Can you say anything about the “value” of those corruption events, and thereelection incentive’s effect on that?

The value of the corruption events captures the relevance of bureaucracycorruption, and their impact on the welfare loss.

What would be the result if you use only the data on corruptionprosecutions that have reached the final verdict and the public officialswere considered guilty?

Information on politician’s experience: matched CV-other data by name

how do you do when different people have the same name?

have you tried to do a matching in all observable characteristics?

Minor Comments and Questions (cont.)

I would change the definition of the “Mandate” variable

“Mandate”= 1 if first mandate politician (and 0, otherwise)Quicker for the reader to interpret the estimated coefficient: reelectionincentive’s effect (as it is motivated in the introduction)

Define from the very beginning in the paper and be more concrete aboutthe meaning of reelection incentive (e.g., long-horizon politicians?)

I would be more cautions when talking about the correlation betweengovernment audit corruption data and prosecution corruption data

it is not so strong: only half of the estimations is statistically significantthe other half is significant at 10%

References:

Coviello and Gagliarducci (2014): exogenous change in term length (Italy)Missing references: XX (2014), Valsecchi (2013)?

Comments on “The Political Economy of Corruption in the Bureaucracy”

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