Corruption and the costs of redistribution: Micro evidence from Indonesia |
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Affiliation: | 1. School of Economics, Ocean University of China, Qingdao 266100, PR China;2. Institute of Marine Development, Ocean University of China, Qingdao 266100, PR China;1. School of Economics & Business Administration, Chongqing University, Chongqing 400030, PR China;2. School of Management, Southwest University of Political Science and Law, Chongqing 401120, PR China;1. Department of Management, Hubei University of Education, Wuhan 430205, China;2. School of Architecture and Urban Planning, Shenzhen University, Shenzhen 518060, China;3. College of Public Administration, Huazhong University of Science and Technology, Wuhan 430074, China;4. Department of City and Regional Planning, University of North Carolina at Chapel Hill, Chapel Hill 27599, USA |
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Abstract: | This paper examines the degree to which the corruption in developing countries may impair the ability of governments to redistribute wealth among their citizens. Specifically, I examine a large anti-poverty program in Indonesia that distributed subsidized rice to poor households. I estimate the extent of corruption in the program by comparing administrative data on the amount of rice distributed with survey data on the amount actually received by households. The central estimates suggest that, on average, at least 18% of the rice appears to have disappeared. Ethnically heterogeneous and sparsely populated areas are more likely to be missing rice. Using conservative assumptions for the marginal cost of public funds, I estimate that the welfare losses from this corruption may have been large enough to offset the potential welfare gains from the redistributive intent of the program. These findings suggest that corruption may impose substantial limitations on developing countries' redistributive efforts, and may help explain the low level of transfer programs in developing countries. |
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