Paul Niehaus, University of California, San Diego, will speak on "The Marginal Rate of Corruption in Public Programs." Thursday, March 3rd, 3:40-5pm, 368A Heady Hall.

The marginal benefits of public spending are a key determinant of optimal fiscal policy. In developing countries public funds are often stolen by corrupt officials, so optimal policy should reflect marginal corruption. We study marginal corruption in India's largest welfare program, an employment scheme, with respect to a wage increase. Strikingly, none of the increase was passed through to workers even though initially most were if anything overpaid. Theory and supporting evidence suggest that this is because the threat of exit to the private sector, and not the threat of complaints, is workers' main source of bargaining power.

Paul Niehaus completed his PhD at Harvard University in 2009 and is currently Assistant Professor of Economics at the University of California, San Diego.  His research explores two distinct themes: how people learn about themselves and their environment, and how to administer social programs in less-developed countries where corruption is a serious constraint.  His projects are funded by the NSF, NIH, and Omidyar Foundation, among others.