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Publications
  • April 2003
  • Article
  • Journal of Law & Economics

The Role of Wages and Auditing during a Crackdown on Corruption in the City of Buenos Aires

By: Rafael Di Tella and Ernesto Schargrodsky
  • Format:Print
  • | Pages:24
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Abstract

We study the prices paid for basic inputs during a crackdown on corruption in the public hospitals of the city of Buenos Aires, Argentina, during 1996 97. We find a well-defined, negative effect on the measures used to capture corruption. Prices paid by hospitals for basic, homogeneous inputs decrease by 15 percent during the first 9 months of the crackdown. After this period prices increase, but they are still 10 percent lower than those prevailing before the crackdown. Relative to the precrackdown period, higher wages play no role in inducing lower input prices when audit intensity can be expected to be maximal (during the first phase of the crackdown) but have a negative and well-defined effect when audit intensity takes intermediate levels (the last phase of the crackdown). Controlling for fixed effects, we find that the wage elasticity of input prices exceeds .20. These results are consistent with the standard model of bribes of Gary Becker and George Stigler.

Keywords

Crime and Corruption; Compensation and Benefits; Accounting Audits; Buenos Aires

Citation

Di Tella, Rafael, and Ernesto Schargrodsky. "The Role of Wages and Auditing during a Crackdown on Corruption in the City of Buenos Aires." Journal of Law & Economics 46, no. 1 (April 2003): 269–92.
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About The Author

Rafael M. Di Tella

Business, Government and the International Economy
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