Corruption and Child Mortality: Evidence from Random Audits in Brazil

• In Event: The Causes, Costs, and Pursuit of Corruption in Latin America

Abstract

Although early-life mortality has fallen substantially across the world in recent decades, it remains disturbingly high in many developing countries. Many neonatal, infant and child deaths have preventable causes that can mitigated even with these nations’ limited budgets (Black et al., 2003, 2010). Numerous studies suggest that governments in developing countries have the potential to improve health outcomes including early-life mortality (Ross, 2008; Kudamatsu, 2012; Pieters et al., 2016; Ramos et al., 2019). Nevertheless, the conditions under which governments improve or undermine such health outcomes, and the mechanisms by which they do so, often remains unclear.

This study focuses on the impact of political corruption on early-life mortality. In many countries, corruption undermines healthcare; for example, public officials may pilfer funds earmarked for medical equipment, exchange bribes for suboptimal healthcare contracts, or demand informal payments from patients waiting for surgeries. According to Transparency International (2019), corruption in the healthcare sector leads to losses to over $500 billion per year, more than the amount necessary to provide universal healthcare coverage across the globe. Scholars and policymakers frequently assert that corruption has substantial effects not only on healthcare expenditures, but also on health outcomes. For example, Hanf et al. (2016) approximates that corruption in the healthcare sector kills approximately 140,000 children across the world each year. Although such studies underscore grave consequences of the phenomenon, the extant literature fails to identify a causal link between corruption and early-life mortality.

We examine this relationship in Brazil, where corruption is a pressing concern. Over the past few years, scores of politicians and bureaucrats have been prosecuted under nation's largest-ever corruption investigation (Operação Lava Jato, or Operation Car Wash), and President Jair Bolsonaro railed against corruption as a pillar of his campaign platform. Corruption in Brazil often involves healthcare. For example, the “Bloodsuckers” (Sanguessugas) corruption scandal – involving extraordinarily overpriced ambulances – implicated nearly a hundred politicians who reportedly received kickbacks and enabled these wasteful purchases. Moreover, in a major cross-national survey, 10.9% of all Brazilian respondents reported paying a bribe to access healthcare during the past year (LAPOP, 2012). Many policymakers suggest a link between corruption and poor health outcomes. For instance, a justice on Brazil’s Supreme Court emphasized last year: “Corruption kills. It kills in the waiting line of SUS [the public healthcare system], in the lack of hospital beds, in the lack of medicine.”

To explore the effects of corruption on early-life mortality in Brazil, we employ exogenous variation in the level of corruption resulting from an impressive government program. With the aim of combating corruption in Brazil’s federal expenditures, the Controladoria Geral da União (CGU, or Office of the Comptroller General) was formed in 2003. That year, the CGU initiated an impressive audit program to root out the corrupt use of federal funds by municipalities. This program, entitled Programa de Fiscalização por Sorteios Públicos (Monitoring Program with Public Lotteries), randomly selected municipalities in televised lotteries every few months, and sent teams of auditors for extensive visits to scrutinize their expenditures of federal funds. By early 2015, the CGU performed over 2,240 audits across 40 lotteries, involving a careful investigation of over R$22 billion of federal funds. The CGU audits reveal substantial corruption in the sphere of healthcare. For example, the audit of Capelinha in Minas Gerais discovered the use of many false receipts for supposed purchases of medicine, which never entered the inventory list of the municipality’s health clinics (Ferraz and Finan, 2011). Avis et al. (2018) rigorously show that the CGU’s audits substantially reduce the level of corruption years after a municipality is audited. One important reason is that when these audits uncover corruption, politicians face electoral as well as legal punishments (Ferraz and Finan, 2008).
Given that the random assignment of audits provides exogeneous variation in the level of subsequent corruption, our study is able to identify the causal effect of decreased corruption on mortality rates. By examining variation in corruption audits across Brazil’s 5,570 municipalities over 13 years, we are thus able to examine whether this exogenous reduction in corruption causes a reduction in early mortality. Our preliminary results suggest that the exogeneous reduction in corruption from these audits caused a significant decline in neonatal, infant, and child mortality rates. As predicted by our theoretical framework, this decline in overall mortality rates stems from a reduction in preventable deaths.

Authors

• Simeon C. Nichter, University of California, San Diego

• Antonio Pedro Ramos, UCLA