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2008 December 11 Thursday
Disaster Relief Funds Cause Corruption

Think Barack Obama's big infrastructure spend is going to make America a better place? Maybe. But that huge influx of money for building stuff bears some resemblance to disaster relief spending for rebuilding. Disaster relief funds cause corruption conviction rates to skyrocket.

Where natural disasters strike, political corruption is soon to follow, say the authors of a study in the Journal of Law and Economics. But it's not the wind and rain that turns good folks bad; it's the money that floods in afterwards from the Federal Emergency Management Agency.

I think the $100 here is supposed to be $100 million. So the billions of dollars that flow in after a big hurricane hit causes the rate of corruption to go up by multiples.

"We find each $100 [million] of FEMA-provided disaster relief increases the average state's corruption by nearly 102 percent," write Peter Leeson (George Mason) and Russell Sobel (West Virginia U.). "Our findings suggest that notoriously corrupt regions of the United States, such as the Gulf Coast, are in part notoriously corrupt because natural disasters frequently strike them. They attract more disaster relief, which makes them more corrupt."

Leeson and Sobel base their conclusions on a statistical model that measured the relationship between FEMA allocations and corruption in each U.S. state. The researchers quantified corruption as the number of per capita convictions of public officials for crimes such as embezzlement, accepting bribes or kickbacks, extortion and unlawful dealings with private vendors or contractors.

Hurricane-prone states like Florida, Mississippi and Louisiana, which receive large amounts of FEMA money, tend to have more corruption convictions per capita. States like Nebraska and Colorado, which receive almost no FEMA dollars, have least corruption.

Leeson and Sobel also found notable spikes in corruption convictions in the year following influxes of FEMA money in a given area. For example, in 1997 Minnesota received around $300 million from FEMA after the Red River Flood. In 1998, corruption convictions in Minnesota spiked to 14 per 100,000 citizens from less than two per 100,000 the year before.

Will we see a boost in corruption due to more infrastructure spending?

Share |      By Randall Parker at 2008 December 11 10:51 PM  Economics Corruption


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Comments
James Bowery said at December 12, 2008 6:49 AM:

To a Chicago politician, that's not a bug, its a feature!

If they really wanted to fix this mess, they'd just do a monthly re-run of the tax rebate stimulus they tested last year with some sort of import limitation on other countries that don't take similar action. But they don't want to fix the mess. They want money for people who have connections.

Audacious Epigone said at December 16, 2008 11:32 AM:

"Hurricane-prone states like Florida, Mississippi and Louisiana, which receive large amounts of FEMA money, tend to have more corruption convictions per capita. States like Nebraska and Colorado, which receive almost no FEMA dollars, have least corruption."

What else do FL, MS, and LA have in common? What about NE and CO? But the spike following FEMA injections is persuasive. It's just probably not the whole story. A demographic breakdown of those convicted of corruption might be revealing.


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