1. Nick York and Miguel Valadez Laric Economist, Evaluation Department 15 th November 2006 Impact Assessment Case Study: Monitoring Corruption in Indonesia 1 Palace Street, London SW1E 5HE Abercrombie House, Eaglesham Road, East Kilbride, Glasgow G75 8EA

2. Page 1 Issues Limited Empirical Evidence on Mitigating Corruption though Monitoring 2 Empirical Questions: 1. Effectiveness of Top Down Approach (Becker and Stigler 1974) 2. Effectiveness of Grassroots Monitoring (poor people’s interests vs local elites) 1 Palace Street, London SW1E 5HE Abercrombie House, Eaglesham Road, East Kilbride, Glasgow G75 8EA

3. Page 2 Background Study Conducted 2003-2004 by Harvard Researcher Ben Olken Funded by DFID/World Bank Strategic Poverty Trust Fund. Subject: Kecamatan Development Project, Village infrastructure. Focus: East and Central Java www.nber.org/~bolken 1 Palace Street, London SW1E 5HE Abercrombie House, Eaglesham Road, East Kilbride, Glasgow G75 8EA

4. Page 3 Method Data sample: 608 villages Roads about to be built. Randomly assign audits to villages and inform ex ante (clustering due to spillovers) Randomly assign accountability meetings Independent randomization of two alternatives plus control villages- some overlap. 1 Palace Street, London SW1E 5HE Abercrombie House, Eaglesham Road, East Kilbride, Glasgow G75 8EA

5. Page 4 Measuring Corruption Independently estimate actual expenditures of building roads Incorporate measures of quality Compare “reported” with “actual estimated” expenditures: isolate missing expenditures Compare missing expenditures control and treatment to unpack impact of each type of monitoring. 1 Palace Street, London SW1E 5HE Abercrombie House, Eaglesham Road, East Kilbride, Glasgow G75 8EA

6. Page 5 Results: Top Down Audits Corruption found in missing materials and labour expenditure not misreported goods prices. Audits reduced corruption by 8% on average Benefits are 150% of cost of audit Threat of Audit enough for effect: not due to audit corrective measures 1 Palace Street, London SW1E 5HE Abercrombie House, Eaglesham Road, East Kilbride, Glasgow G75 8EA

7. Page 6 Results: Grassroots Monitoring Accountability Meeting attendance raised by 40%. Substantial Reductions in missing labour expenditures 9 – 18%. Small, non-significant reduction in missing materials expenditure. Since bulk of cost is in materials overall effect is negligible. Hypotheses: information, incentives, public good? 1 Palace Street, London SW1E 5HE Abercrombie House, Eaglesham Road, East Kilbride, Glasgow G75 8EA

8. Nick York and Miguel Valadez Laric Economist, Evaluation Department 15 th November 2006 Impact Evaluation Case Study: Monitoring Corruption in Indonesia 1 Palace Street, London SW1E 5HE Abercrombie House, Eaglesham Road, East Kilbride, Glasgow G75 8EA