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Working Paper 277 - Deterrence and Legitimacy in Anti-Corruption Policymaking
In our framed laboratory experiment, two Public Officials, A and B, make consecutive decisions regarding embezzlement from separate funds. Official B observes Official A’s decisions before making his/her own. We find a contagion effect in embezzlement in that facing a corrupt Official A increases the likelihood and extent of embezzlement by Official B. Likewise, deterrence matters in that higher detection probabilities significantly decrease the likelihood and extent of embezzlement. Crucially, when the same deterrence policy applies to both officials, detection is more effective in curbing embezzlement if chosen by an honest public official A rather than a corrupt Public Official A. This legitimacy effect may help explain why anticorruption policies can fail in countries where the government itself is believed (or known) to be corrupt.