Does transparency reduce political corruption?

• Author: Octavian Strîmbu,Patrick González
• Published date: 01 April 2018
• DOI: http://doi.org/10.1111/jpet.12265
• Date: 01 April 2018

Received: 14 November2016 Accepted: 16 July 2017

DOI: 10.1111/jpet.12265

ARTICLE

Does transparency reduce political corruption?

Octavian Strîmbu Patrick González

Départementd'économique, CREATE, Université

Laval,Québec, QC, Canada

OctavianStrîmbu, Département d'économique,

CREATE,Université Laval, Québec, QC, Canada,

G1V0A6 (ostrimbu@ecn.ulaval.ca). Patrick

González,Département d'économique, CREATE,

UniversitéLaval, Québec, QC, Canada, G1V 0A6

(pgon@ecn.ulaval.ca)

Theauthors thank Gustavo J. Bobonis, Arnaud

Dellis,and Nicolas Jacquemet for their comments

onan earlier draft.

Does a better monitoring of officials'actions (transparency) lower

the incidence of corruption? Using a common agency game with

imperfect information, we show that the answer depends on the

measure of corruption that one uses. More transparency lowers the

prevalence of corruption but raises the averagebribe as it motivates

thecorruptor to bid more aggressively for the agent's favor. We show

that transparency affects the prevalence of corruption at the margin

through a competitive effect and an efficiency effect.

1INTRODUCTION

Democratic political systems provide the citizen effective means to observeand to influence politicians'decisions. Yet

assuming that these decisions always reflect the citizen's preferences is overly optimistic. Every now and then the

media reports cases of policies that hardly maximize any kind of social welfare function: contracting public procure-

ments at exorbitantprices, supporting hazardous economic activities in environmentally protected areas, and provid-

ing useless public facilities, are just a few examples. Although mostly a secret phenomenon, corruption is sometimes

exposed during spectacular judicial inquiries.

It is often claimed that improving the transparencyof the decision process is a cure to corruption (see Transparency

International, 2003). In this paper,we study that claim. What we find is that although more transparency would lower

the prevalence of corruption, it might actually lead to more money being poured into corruption bribes.

In an opaque system, the public has little incentive to influence the politicians. As a result, the corruptors do not

haveto do much to influence them: corruption is widespread but the bribes are low. Improved transparency empowers

the public who then fight more aggressivelyto counteract the influence of the corruptors. But the corruptors fight back

and the bribes increase.

It is not our point that improved transparency is a bad policy.We show that transparency augments expected wel-

fare. But it also augments the shadow value of the official's power.The expected bribe increases because the corruptor

is now ready to pay more to influence that power.

Wemake our point with a common agency model in which the public and the corruptor (the principals) try to influence

the choice of an action by an agent (the politician or official). The principals favor different policies; yet, although the

public's preferred policy would lead to a greater increase in total welfare, the corruptor mayget a better deal by bribing

the agent to implement his preferred policy.

We innovate by introducing an information gap between the conflicting principals: while the corruptor always

observes the agent's action, the public does so with some probability and has to trust the agent's word otherwise.

In this setting, the celebrated efficiency result of the common agency model (i.e., there is always an equilibrium with

Journal of Public Economic Theory.2018;20:123–135. wileyonlinelibrary.com/journal/jpet c

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