The Dynamics of Corruption in Developing Countries: The Golden Goose Effect

On Tuesday, October 6, 2009, Center for Global Development and The Paul H. Nitze School of Advanced International Studies present a Massachusetts Avenue Development Seminar (MADS)* on The Dynamics of Corruption in Developing Countries: The Golden Goose Effect. The seminar featured Sandip Sukhtankar, Assistant Professor of Economics, Dartmouth College, along with discussant Melissa Thomas, Associate Professor of International Development, Johns Hopkins University SAIS. 

Abstract: 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 exogenous changes in statutory wages, 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. This behavioral response tends to stabilize levels of corruption in the face of external shocks. 

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*The Massachusetts Avenue Development Seminar (MADS) series is an effort by the Center for Global Development and The Paul H Nitze School of Advanced International Studies to take advantage of the incredible concentration of great international development scholars in the Metro Washington, DC area. The series seeks to bring together members of this community and improve communication between them.