Social accountability to contain corruption

In this paper we investigate the welfare properties of simple reappointment rules aimed at holding public officials accountable and monitoring their activity. Public officials allocate budget resources-to various activities delivering public services to citizens. Officials have discretion over the use of resource, and can divert some of them for private ends. Due to a liability constraint, zero diversion can never be obtained in all states. The optimal reappointment mechanism under complete information is shown to exhibit some leniency. In the absence of information a rule with random verification in a pre-announced subset is shown to be optimal. Surprisingly, most common rules make little use of hard information about service delivery when available. By way of contrast, requesting that the public official defend his record publicly can be very useful if service users can refute false claims with cheap-talk complaints: the first-best complete information outcome can be approached. (C) 2015 Elsevier B.V. All rights reserved.