Corruption is a major barrier to redistribution and poverty alleviation in less-developed countries. This project studies choices by bureaucrats in rural India who can steal from multiple sources-the government or beneficiaries-in a single employment guarantee program. Exogenous changes in program parameters make it possible to adapt and test several core hypotheses about corrupt behavior. What constraints do corrupt officials face in maximizing profit? Does corruption in one form have positive or negative spillover effects onto other forms? Answering these questions will provide micro-empirical foundations for economic theories of corrupt behavior. This approach complements the recent empirical literature on corruption which has measured reduced-form effects of interventions on the level of corruption (Reinikka & Svensson 2005, Olken 2007). The project studies corruption in the context of India's flagship redistributive scheme, the National Rural Employment Guarantee Act (NREGA). This act represents an unprecedented attempt to transfer India's new-found wealth to its lagging rural majority: it extends to every rural household a legal guarantee of 100 days per year of paid employment. The potential fiscal ramifications are massive, with costs expected to reach 1-2% of GDP. The success of the program, along with its continued political viability, is linked to the extent to which the corruption can be controlled. However, anecdotal evidence from local NGO leaders and audit studies suggests that corruption is rampant at least in some parts of the country. The NREGA affords a unique opportunity to study corruption because, as part of its transparency measures, all official micro-records are available online. Comparing these official records to original survey data collected from (alleged) program participants yields a credible measure of corruption, both in the form of over-reported participation and under-paid wages. Moreover, key program parameters such as minimum wages are set by states and have changed over time. Comparing outcomes before and after these changes on both sides of state borders generates credible difference-in-differences estimates of their effects. The NREGA also provides an exciting context in which to study issues in political economy such as the disciplinary power of elections, decentralization, and women's leadership. Among the most basic questions in the political economy of corruption is whether the discipline of direct elections can enforce good behavior, and we study this by surveying NREGA participants on their political behavior. Next, political decentralization and local participation has become a popular strategy for development. Under the NREGA, half of the projects in each district must be implemented at the block level (or higher) by a bureaucrat, and the other half at the gram panchayat (village) level by an elected official. Differences in corruption and differential responses to wage changes will shed light on the relative merits of these forms of implementation. Finally, female politicians are negatively associated with corruption in both international comparisons and local studies (Duflo and Topalova 2004). In India, some gram panchayats are randomly chosen to have a female sarpanch and the impacts of this policy on corruption in NREGA projects can be readily assessed.
