Question

A, C, D; Olken (2007) and Di Tella and Schargrodsky (2003) both demonstrate empirically that corrupt officials do indeed respond to incentives, both static and dynamic. Thus, it is not the case that increasing the probability of audit and shifting incentives does not generate a response in corrupt officials. However, it is possible that these officials may find other avenues of corruption, since increasing the probability of audits does not reduce corruption entirely. Moreover, auditors' enforcers may themselves be susceptible to being bribed. And auditors are not perfect, so, the probability of detection may not necessarily rise to 1 even if the probability of audit goes to 1.

One way to clamp down on corrupt officials is to increase the probability of being audited for those officials to 1. However, this may not necessarily solve the problem of overall corruption because (Check all that apply):

A. Corrupt officials may substitute to other margins that aren't affected by audits

B. There is little empirical evidence that officials respond to incentives (such as an increased probability of audit)

C. Enforcers may themselves be corrupt

D. The probability of detection may not necessarily rise to 1 even if the probability of audit goes to 1

Answer 1

The subject of this question is corruption and its impact on audits and incentives for officials. It explores whether increasing the probability of audit can effectively reduce corruption. The answer options provided include reasons why increasing the probability of audit may not solve the problem of corruption.

Step-by-step explanation:

The subject of this question is corruption and its impact on audits and incentives for officials. The question explores whether increasing the probability of audit for corrupt officials can effectively reduce overall corruption. The answer options provided include reasons why increasing the probability of audit may not solve the problem of corruption, such as corrupt officials finding other avenues of corruption, the potential corruption of auditors' enforcers, and the imperfect nature of auditors.