Corrupt Bureaucrats: the Response of Non-elected Officials to Electoral Accountability

Abstract: Modern state bureaucracies are designed to be insulated from political interference. Successful insulation implies that politicians' electoral incentives do not affect bureaucrats' corruption. I test this prediction by assembling a unique dataset on corruption, promotions and demotions for more than 4 million Indonesian local civil servants. To identify the effect of reelection incentives, I exploit the existence of term limits and a difference-in-difference strategy. I find that, in districts where politicians can run for reelection, bureaucrats' corruption is 38 percent lower than in districts where they cannot, and that the effect is driven by both top and lower level bureaucrats, which constitutes new evidence of the deep, far-reaching effects of politicians' accountability on local civil servants. Robustness tests, including placebo estimates, the control for politicians' ability and restricting the sample to close elections, support the main findings. I then explore a mechanism where bureaucrats have career concerns and politicians facing reelection manipulate such concerns by increasing the turnover of top bureaucrats. Consistent with this mechanism, I find that reelection incentives increase demotions of top bureaucrats and promotions of administrative bureaucrats.