Christian Zünd

  Wednesday, 27th November 2019

  14:00 - 15:00

   Clay Room - Nuffield College

   Income Underreporting and Policy Effectiveness


This paper demonstrates how corruption negatively impacts policy effectiveness in a program that is explicitly designed to be unsusceptible to bribery, clientelism, and the embezzlement of money: Brazil’s Bolsa Família program. Exploiting two natural experiments I estimate the program’s effectiveness in different years and municipalities to show that Bolsa Família’s effect on school enrollment increases by a third after a municipality has been subjected to a random anti-corruption audit. To explain this effect, I report the results of an experiment with 6,998 Bolsa Família registration centers: Local corruption increases the probability that families successfully underreport their income when registering for Bolsa Família, making it harder to target the families that benefit most. Ruling out alternative explanations, I show that neither changes in social norms, improved school attendance monitoring, administrative processes, infrastructure, complementary programs, tighter governance, nor increased whistleblowing can account for the increase in Bolsa Família’s effectiveness after a municipality has been audited at random. Taken together, these results suggest that income underreporting can explain how, despite the program’s safeguards, local corruption undermines the effectiveness of Bolsa Família.