Corrupt Bureaucrats: The Response of Non-Elected Officials to Electoral Accountability

Abstract

Modern state bureaucracies are designed to be insulated from political interference. While successful insulation means that civil servants will not be subject to patronage, it also means that they may not respond to politicians' attempts to increase economic performance. I speculate that politicians' control over the bureaucracy is beneficial for economic outcomes when politicians have incentives to perform, while it is detrimental otherwise. I test this prediction by exploiting variation in politicians' control over the bureaucracy and, separately, politicians' reelection incentives in the context of Indonesian local governments and bureaucrats' corruption using a variety of newly collected and confidential administrative data and a DDD research design. I then use three separate measures of corruption and find that bureaucrats' control over the bureaucracy decreases bureaucrats' corruption when it is associated with reelection incentives, while it does not otherwise. Control over the bureaucracy, joint with reelection incentives, is also associated with greater turnover of the top bureaucracy. Finally, I provide evidence of a positive effect on households' consumption, which suggests that the beneficial effects of control over the bureaucracy can be far-reaching.