Comments by Ina Ganguli on paper "Is Corruption Good for your Health?" presented by Guilherme Lichand at the SITE Corruption Conference, 31 August 2015. Find more at: https://www.hhs.se/site

1. Comments on:
“Is Corruption Good for your Health?”
by Lichand, Lopes and Medeiros
Ina Ganguli (SITE & UMass Amherst)
SITE Conference
“Fighting Corruption in Developing and Transition Countries”
September 1, 2015
Ganguli comments Corruption and Health Sept 1, 2015 1 / 10

2. “Every dollar that a corrupt official or a corrupt
business person puts in their pocket is a dollar stolen
from a pregnant woman who needs health care; or
from a girl or a boy who deserves an education; or
from communities that need water, roads, and
schools.” - Jim Kim, World Bank President
Ganguli comments Corruption and Health Sept 1, 2015 2 / 10

3. Paper Overview
Research question
What is the impact of monitoring mechanisms (audit program) on
corruption? (theft of public resources)
How does it affect health outcomes?
Setting: Brazilian anticorruption program
Program launched in 2003 - fed gov’t randomly selected municipal
gov’ts to be audited for use of federal funds
Once municipality is chosen:
Controladoria Geral da Uniao (CGU) gathers info on all federal funds
transferred to the municipal gov’t from 2001 and on (retrospective)
10-15 auditors sent to municipality to examine accounts and
documents, meet local communities
After 1 week report is submitted to CGU and then made public
(internet, media)
Ganguli comments Corruption and Health Sept 1, 2015 3 / 10

4. “Mayors divert funds, intended for education and health projects, toward
the purchase of cars, fuel, apartments, or payment of their friends
salaries... in Paranhos, Mato Grosso do Sul, $69,838 was paid to
implement a rural electrification project..one of the farms benefitting from
the project was owned by the mayor.” (Ferraz & Finnan 2011)
Ganguli comments Corruption and Health Sept 1, 2015 4 / 10

5. Overview, cont’d
Empirical Approach
Dataset of audit program reports for health transfers to municipalities
Irregularities are coded as corruption (e.g. irregular receipts) or
mismanagement (e.g. diversion of resources for other goals)
Also coded as high or low procurement intensity if certain terms in
description (e.g. acquisition)
Linked to health indicators at muncipal (program) level
Difference-in-Difference (DD) based on incidence of procurement
For the same municipality, compare corruption before and after program
for high-procurement intensity vs. low-procurement intensity transfers
Corruption should be more prevalent for high-procurement intensity
transfers and so treatment intensity is higher
Ganguli comments Corruption and Health Sept 1, 2015 5 / 10

6. Key Findings: Corruption is good for our health
Decrease in corruption of 17 percentage points
Health outcomes decreased by 0.3 to 0.5 std deviations
Decrease in corruption led to increase in mismanagement
Less spending, particularly for infrastructure/stock problems and
discretion-intensive transfers
Ganguli comments Corruption and Health Sept 1, 2015 6 / 10

7. Comments I: Understanding the DD?
Paper begins describing that municipalities were randomly selected to
be audited - walk through the endogeneity concerns and
assumptions/reason for DD
Can relate to work on the setting that leverage other variation, such as
reelection incentives of mayors (Ferraz & Finan 2008, 2011)
High vs. low procurement intensity - binary based on 50% of actions
for program coded; sensitivity to this discussed but more info,
reasoning for choice of terms.
DD assumption of no unobserved time-varying differences between
groups
Retrospective data - might there be differential availability of data
going back for high vs. low procurement intensity? Paper trails
(related to Pomeranz, 2015)?
Are low- and high-procurement intensity transfers are treated equally
by auditors? Might auditors have different pressures to report on low
vs. high intensity transfers?
Ganguli comments Corruption and Health Sept 1, 2015 7 / 10

8. Comments II: Defining corruption
Main DV is share of investigations coded as corrupt (based on terms)
Possible to use other measures? E.g. Ferraz & Finnan (2011) define
corruption primarily as “the total amount of resources related to
corrupt activities, expressed as a share of the total amount of
resources audited”
Sensitivity to choice of terms for Corruption vs. Mismanagement?
(e.g. resource diversion?)
Ganguli comments Corruption and Health Sept 1, 2015 8 / 10

9. Comments III: Is it really bad for everyone’s health?
Since comparison is for high vs. low procurement intensity programs,
focus on indicators linked to specific programs
“Whenever the same indicator applied to multiple transfers, we
excluded that variable in the analysis”
This leads to a small set of health outcomes (hospital beds,
immunization, water & santiation coverage) - which are excluded and
possible to gather other health measures?
Does this differentially impact certain part of the population (poor)?
Ganguli comments Corruption and Health Sept 1, 2015 9 / 10

10. Comments IV: Why and what happens next?
Striking that findings are different for education (e.g. Reinikka and
Svensson, 2005) - possible to compare to transfers for education?
“Due to budget constraints, the random audits program has been
recently downscaled.... From 5,000 investigations per year in 2010, it
down to 2,000 in 2011 and 1,000 in 2013”; focus now on capitals and
large transfers
Is this what analysis would suggest? New focal point?
Ganguli comments Corruption and Health Sept 1, 2015 10 / 10