When opportunities for corrupt earnings rise, is there more corruption? This fundamental question is the subject of new, frontier-pushing research by two young stars of development economics: CGD alumnus Sandip Sukhtankar and his co-author Paul Niehaus. I was delighted to learn this week that their work (ungated) just won this year’s American Economic Association prize for best economic policy paper.
When officials can earn more from corrupt acts, you might expect there to be more corruption. But wait: Suppose that corrupt acts are risky and if you get caught you’re out of the game. In that case, greater opportunities for corrupt acts might reduce corrupt behavior going forward. The bigger pie makes officials want to get their slice, but to do that they need to take fewer risks to stick around longer. Sandip and Paul call this the “golden goose” effect, after the fable discouraging myopia. In economics these countervailing forces are called the “substitution effect” and the “income effect.” This might seem like mere speculation; Sandip and Paul have shown that—at least in India—it really happens.
See full Article: http://www.cgdev.org/blog/causes-corruption-developing-countries-cgd-alumnus-sandip-sukhtankar-honored-his-research
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