What is the best way to control and measure corruption? This paper outlines a method devised by the author which measures corruption and uses it to evaluate alternative strategies to reduce corruption on an Indonesian road-building project. Two types of strategies were tried: encouraging community participation and increasing the probability of audits. The projects tested were Indonesian government programs supported by a loan from the World Bank, the Kecamatan Development Program (KDP) which funds projects in about 15,000 villages each year. Each village receives an average of $8,800, which they often use to surface existing dirt roads.
The paper shows how checks on corruption are built into KDP. First, funds are paid to village ‘implementation teams’ in three installments. To receive the second and third payments, the teams must make accountability reports at an open village meeting. Second, each project has a 4 percent chance of being audited by an independent government agency. This study introduced two anti-corruption strategies: enhancing community participation and increasing government audits. The paper finds that because corruption can be widely embedded in a society, it is difficult to study anticorruption measures using traditional techniques. The author concludes however that increased grassroots participation was not the solution. Additional findings include:
- traditional government audits cost-effectively decreased “missing expenditures” by 8 percentage points;
- on average, community monitoring did not reduce corruption;
- corruption can be measured as “missing expenditures;
- measuring corruption using perceptions can potentially be misleading.
