Audit Risk and Rent Extraction: Evidence from a Randomized Evaluation in Brazil

We report results from a randomized policy experiment designed to test whether increased audit risk deters rent extraction in local public procurement and service delivery in Brazil. Our estimates suggest that temporarily increasing annual audit risk by about 20 percentage points reduced the proportion of procurement processes with evidence of corruption by about 15 percentage points and the share of audited resources involved in corruption by about 10 percentage points. We show that these results are invariant to alternative corruption codings that have been used in prior literature. In contrast, we find no evidence that increased audit risk affected the quality of publicly provided preventive and primary health care services - measured based on user satisfaction surveys - or compliance with national regulations of the conditional cash transfer program Bolsa Família