The Marginal Disutility from Corruption in Social Programs: Evidence from Program Administrators and Beneficiaries

Abstract

Concerns about fraud in welfare programs are common arguments worldwide against such programs. We conducted a survey experiment with over 28,000 welfare program administrators and over 19,000 beneficiaries in Indonesia to elicit the ‘marginal disutility from corruption,’ i.e., the trade-between more generous social assistance and losses due to corruption and fraud. Merely mentioning corruption reduced perceived program success, equivalent to distributing more than 20 percent less aid. However, respondents were not sensitive to the amount of corruption—respondents were willing to trade off 2 dollars of additional losses for an additional 1 dollar distributed to beneficiaries. Program administrators and beneficiaries had similar assessments.