Comments by Klenio Barbosa on paper "The Political Economy of Corruption in the Bureaucracy" presented by Michele Valsecchi at the SITE Corruption Conference, 31 August 2015. Find more at: https://www.hhs.se/site

1. Comments on
“The Political Economy of Corruption in the
Bureaucracy”
By Michele Valsecchi
Klenio Barbosa
Sao Paulo School of Economics - FGV
SITE’s Corruption Conference
Stockholm/SE - September 1, 2015
Klenio Barbosa (FGV) Comments May 2015 1 / 10

2. The Paper
Research Question:
Does Reelection Incentives induce politician to deter corruption in the
bureaucracy?
Data:
Very detailed data (99-04) for Indonesian districts about:
corruption events per district: reported in the prosecution’s files
reelection incentive: district election and politicians’ career (tenure in
office joint with term limit for each district’s head)
Results:
Reelection incentive does reduce corruption
Effect comes from a reduction in corruption among district’s low staff
⇒ Interpretation: long-horizon politicians monitor more intensively their
staff in order to deter bureaucracy’s corruption
Klenio Barbosa (FGV) Comments May 2015 2 / 10

3. General Comments
Very interesting paper: I enjoyed reading it!
Reasons
1 Data set: detailed information is used
2 Empirical Strategy: very convincing
it seems to deal with the main potential endogeneity problems
3 Results: main effects are pretty much robust
low district’s bureaucracy effect (in particular)
Klenio Barbosa (FGV) Comments May 2015 3 / 10

4. General Comments
Very interesting paper: I enjoyed reading it!
Reasons
1 Data set: detailed information is used
2 Empirical Strategy: very convincing
it seems to deal with the main potential endogeneity problems
3 Results: main effects are pretty much robust
low district’s bureaucracy effect (in particular)
Klenio Barbosa (FGV) Comments May 2015 3 / 10

5. General Comments
Very interesting paper: I enjoyed reading it!
Reasons
1 Data set: detailed information is used
2 Empirical Strategy: very convincing
it seems to deal with the main potential endogeneity problems
3 Results: main effects are pretty much robust
low district’s bureaucracy effect (in particular)
Klenio Barbosa (FGV) Comments May 2015 3 / 10

6. General Comments
Very interesting paper: I enjoyed reading it!
Reasons
1 Data set: detailed information is used
2 Empirical Strategy: very convincing
it seems to deal with the main potential endogeneity problems
3 Results: main effects are pretty much robust
low district’s bureaucracy effect (in particular)
Klenio Barbosa (FGV) Comments May 2015 3 / 10

7. Major Concerns/Questions
1 Interpretation of the results and contribution
2 Estimation: Reelection effect on the probability of prosecution
3 Reelection Incentives and 2nd Mandate
Klenio Barbosa (FGV) Comments May 2015 4 / 10

8. Major Concern # 1
Interpretation of the results: What is the true story?
Motivation: Reelection provides incentives to the politicians
deter/monitor corruption among the bureaucracy
However: the results are also compatible with Ferraz and Finan (2011)
Reelection motivation reduces own politician’s corruption
Bureaucracy may act as corrupter to rise benefits for politician
Potential competing stories:
“Politicians monitoring story” versus “Stopping corruption story”
Some results in your favor:
district’s staff: low rank (sign.) and high rank (non sign.) - more is need !!!
Klenio Barbosa (FGV) Comments May 2015 5 / 10

9. Major Concern # 1
Interpretation of the results: What is the true story?
Motivation: Reelection provides incentives to the politicians
deter/monitor corruption among the bureaucracy
However: the results are also compatible with Ferraz and Finan (2011)
Reelection motivation reduces own politician’s corruption
Bureaucracy may act as corrupter to rise benefits for politician
Potential competing stories:
“Politicians monitoring story” versus “Stopping corruption story”
Some results in your favor:
district’s staff: low rank (sign.) and high rank (non sign.) - more is need !!!
Klenio Barbosa (FGV) Comments May 2015 5 / 10

10. Major Concern # 1
Interpretation of the results: What is the true story?
Motivation: Reelection provides incentives to the politicians
deter/monitor corruption among the bureaucracy
However: the results are also compatible with Ferraz and Finan (2011)
Reelection motivation reduces own politician’s corruption
Bureaucracy may act as corrupter to rise benefits for politician
Potential competing stories:
“Politicians monitoring story” versus “Stopping corruption story”
Some results in your favor:
district’s staff: low rank (sign.) and high rank (non sign.) - more is need !!!
Klenio Barbosa (FGV) Comments May 2015 5 / 10

11. Major Concern # 1
Interpretation of the results: What is the true story?
Motivation: Reelection provides incentives to the politicians
deter/monitor corruption among the bureaucracy
However: the results are also compatible with Ferraz and Finan (2011)
Reelection motivation reduces own politician’s corruption
Bureaucracy may act as corrupter to rise benefits for politician
Potential competing stories:
“Politicians monitoring story” versus “Stopping corruption story”
Some results in your favor:
district’s staff: low rank (sign.) and high rank (non sign.) - more is need !!!
Klenio Barbosa (FGV) Comments May 2015 5 / 10

12. Major Concern # 1
Interpretation of the results: What is the true story?
Motivation: Reelection provides incentives to the politicians
deter/monitor corruption among the bureaucracy
However: the results are also compatible with Ferraz and Finan (2011)
Reelection motivation reduces own politician’s corruption
Bureaucracy may act as corrupter to rise benefits for politician
Potential competing stories:
“Politicians monitoring story” versus “Stopping corruption story”
Some results in your favor:
district’s staff: low rank (sign.) and high rank (non sign.) - more is need !!!
Klenio Barbosa (FGV) Comments May 2015 5 / 10

13. Major Concern # 1 (cont.)
Suggestion: Push that further and explore more your data
1 Explore the information in your data on the staff members (profile and
career path) that were accused of corruption
Appointed staff
Ferraz and Finan
versus Regular public official
your story (independent bureaucracy)
2 Explore village’s political structure:
Urban villages: heads are appointed by head’s district
Rural villages: elected
3 Remark: I do not see any strong effect on corruption among village
heads (3 out 8 estimated coefficients are significant)
Klenio Barbosa (FGV) Comments May 2015 6 / 10

14. Major Concern # 1 (cont.)
Suggestion: Push that further and explore more your data
1 Explore the information in your data on the staff members (profile and
career path) that were accused of corruption
Appointed staff
Ferraz and Finan
versus Regular public official
your story (independent bureaucracy)
2 Explore village’s political structure:
Urban villages: heads are appointed by head’s district
Rural villages: elected
3 Remark: I do not see any strong effect on corruption among village
heads (3 out 8 estimated coefficients are significant)
Klenio Barbosa (FGV) Comments May 2015 6 / 10

15. Major Concern # 1 (cont.)
Suggestion: Push that further and explore more your data
1 Explore the information in your data on the staff members (profile and
career path) that were accused of corruption
Appointed staff
Ferraz and Finan
versus Regular public official
your story (independent bureaucracy)
2 Explore village’s political structure:
Urban villages: heads are appointed by head’s district
Rural villages: elected
3 Remark: I do not see any strong effect on corruption among village
heads (3 out 8 estimated coefficients are significant)
Klenio Barbosa (FGV) Comments May 2015 6 / 10

16. Major Concern # 2
Estimation: Probability of prosecution and reelection
Discrete-time hazard model:
hit =
Pr (prosecution in i at t)
Pr( non prosecution in i ∀t < t)
= β0 + β12ndMandateit + βjDummy J Yearsit + εit
Figure 3 suggests that Reelection affects the time of the prosecution
Table 5 may suffer from “omitted variable”: biasing reelection’s effect
Alternative specification:
hit = β0+β12ndMandateit+ βjDummy J Yearsit+ γk2ndMandateit × Dummy J Yearsit+εit
Question: What is the baseline year effect the dummy?
Klenio Barbosa (FGV) Comments May 2015 7 / 10

17. Major Concern # 2
Estimation: Probability of prosecution and reelection
Discrete-time hazard model:
hit =
Pr (prosecution in i at t)
Pr( non prosecution in i ∀t < t)
= β0 + β12ndMandateit + βjDummy J Yearsit + εit
Figure 3 suggests that Reelection affects the time of the prosecution
Table 5 may suffer from “omitted variable”: biasing reelection’s effect
Alternative specification:
hit = β0+β12ndMandateit+ βjDummy J Yearsit+ γk2ndMandateit × Dummy J Yearsit+εit
Question: What is the baseline year effect the dummy?
Klenio Barbosa (FGV) Comments May 2015 7 / 10

18. Major Concern # 2
Estimation: Probability of prosecution and reelection
Discrete-time hazard model:
hit =
Pr (prosecution in i at t)
Pr( non prosecution in i ∀t < t)
= β0 + β12ndMandateit + βjDummy J Yearsit + εit
Figure 3 suggests that Reelection affects the time of the prosecution
Table 5 may suffer from “omitted variable”: biasing reelection’s effect
Alternative specification:
hit = β0+β12ndMandateit+ βjDummy J Yearsit+ γk2ndMandateit × Dummy J Yearsit+εit
Question: What is the baseline year effect the dummy?
Klenio Barbosa (FGV) Comments May 2015 7 / 10

19. Major Concern # 2
Estimation: Probability of prosecution and reelection
Discrete-time hazard model:
hit =
Pr (prosecution in i at t)
Pr( non prosecution in i ∀t < t)
= β0 + β12ndMandateit + βjDummy J Yearsit + εit
Figure 3 suggests that Reelection affects the time of the prosecution
Table 5 may suffer from “omitted variable”: biasing reelection’s effect
Alternative specification:
hit = β0+β12ndMandateit+ βjDummy J Yearsit+ γk2ndMandateit × Dummy J Yearsit+εit
Question: What is the baseline year effect the dummy?
Klenio Barbosa (FGV) Comments May 2015 7 / 10

20. Major Concern # 2
Estimation: Probability of prosecution and reelection
Discrete-time hazard model:
hit =
Pr (prosecution in i at t)
Pr( non prosecution in i ∀t < t)
= β0 + β12ndMandateit + βjDummy J Yearsit + εit
Figure 3 suggests that Reelection affects the time of the prosecution
Table 5 may suffer from “omitted variable”: biasing reelection’s effect
Alternative specification:
hit = β0+β12ndMandateit+ βjDummy J Yearsit+ γk2ndMandateit × Dummy J Yearsit+εit
Question: What is the baseline year effect the dummy?
Klenio Barbosa (FGV) Comments May 2015 7 / 10

21. Major Concern # 3
Reelection Incentives and 2nd Mandate
Interpretation of the results relies on assumption that politicians in their
second mandate have lower reelection incentive
Questions:
Do 2nd mandate politicians retire afterwards?
Don’t they aim to run for higher admin layers: president, province
governor?
Districts are important. So, those politicians in 2nd mandate should be
competitive ones that aim to be head of higher administrative layers
Politician career concern (Mattozzi and Merlo, 2008)
If it is the case, how to interpret your results?
Hint: Restrict the sample to politicians that did not run for higher
administrative layers
Klenio Barbosa (FGV) Comments May 2015 8 / 10

22. Major Concern # 3
Reelection Incentives and 2nd Mandate
Interpretation of the results relies on assumption that politicians in their
second mandate have lower reelection incentive
Questions:
Do 2nd mandate politicians retire afterwards?
Don’t they aim to run for higher admin layers: president, province
governor?
Districts are important. So, those politicians in 2nd mandate should be
competitive ones that aim to be head of higher administrative layers
Politician career concern (Mattozzi and Merlo, 2008)
If it is the case, how to interpret your results?
Hint: Restrict the sample to politicians that did not run for higher
administrative layers
Klenio Barbosa (FGV) Comments May 2015 8 / 10

23. Major Concern # 3
Reelection Incentives and 2nd Mandate
Interpretation of the results relies on assumption that politicians in their
second mandate have lower reelection incentive
Questions:
Do 2nd mandate politicians retire afterwards?
Don’t they aim to run for higher admin layers: president, province
governor?
Districts are important. So, those politicians in 2nd mandate should be
competitive ones that aim to be head of higher administrative layers
Politician career concern (Mattozzi and Merlo, 2008)
If it is the case, how to interpret your results?
Hint: Restrict the sample to politicians that did not run for higher
administrative layers
Klenio Barbosa (FGV) Comments May 2015 8 / 10

24. Major Concern # 3
Reelection Incentives and 2nd Mandate
Interpretation of the results relies on assumption that politicians in their
second mandate have lower reelection incentive
Questions:
Do 2nd mandate politicians retire afterwards?
Don’t they aim to run for higher admin layers: president, province
governor?
Districts are important. So, those politicians in 2nd mandate should be
competitive ones that aim to be head of higher administrative layers
Politician career concern (Mattozzi and Merlo, 2008)
If it is the case, how to interpret your results?
Hint: Restrict the sample to politicians that did not run for higher
administrative layers
Klenio Barbosa (FGV) Comments May 2015 8 / 10

25. Major Concern # 3
Reelection Incentives and 2nd Mandate
Interpretation of the results relies on assumption that politicians in their
second mandate have lower reelection incentive
Questions:
Do 2nd mandate politicians retire afterwards?
Don’t they aim to run for higher admin layers: president, province
governor?
Districts are important. So, those politicians in 2nd mandate should be
competitive ones that aim to be head of higher administrative layers
Politician career concern (Mattozzi and Merlo, 2008)
If it is the case, how to interpret your results?
Hint: Restrict the sample to politicians that did not run for higher
administrative layers
Klenio Barbosa (FGV) Comments May 2015 8 / 10

26. Minor Comments and Questions
Outcome variable is the number of corruption events.
Can you say anything about the “value” of those corruption events, and the
reelection incentive’s effect on that?
The value of the corruption events captures the relevance of bureaucracy
corruption, and their impact on the welfare loss.
What would be the result if you use only the data on corruption
prosecutions that have reached the final verdict and the public officials
were considered guilty?
Information on politician’s experience: matched CV-other data by name
how do you do when different people have the same name?
have you tried to do a matching in all observable characteristics?
Klenio Barbosa (FGV) Comments May 2015 9 / 10

27. Minor Comments and Questions (cont.)
I would change the definition of the “Mandate” variable
“Mandate”= 1 if first mandate politician (and 0, otherwise)
Quicker for the reader to interpret the estimated coefficient: reelection
incentive’s effect (as it is motivated in the introduction)
Define from the very beginning in the paper and be more concrete about
the meaning of reelection incentive (e.g., long-horizon politicians?)
I would be more cautions when talking about the correlation between
government audit corruption data and prosecution corruption data
it is not so strong: only half of the estimations is statistically significant
the other half is significant at 10%
References:
Coviello and Gagliarducci (2014): exogenous change in term length (Italy)
Missing references: XX (2014), Valsecchi (2013)?
Klenio Barbosa (FGV) Comments May 2015 10 / 10