(Assignment 3) Nathan M. Jensen and Aminur Rahman: “The Silence of Corruption: Identifying underreporting of business corruption through randomised response techniques” - Isha Bhallamudi

1.     The relationship between corruption, politics and business activity is contentious, but one bottom line is that corruption tends to deter investment.

2.     It is difficult to measure corruption objectively because honest answers to questions about corruption can have adverse consequences on the answering party.

3.     Therefore, “much of what we know about corruption is either through the subjective evaluations of experts or through the use of firm-level surveys that are plagued by non-responses to direct questions on corruption as well as bias (due to fear of reporting)"

4.     This study looks at Bangladesh, one of the most corrupt countries in the world, and uses a randomized response technique (which mitigates the above problems, for example by allowing for deniability) to evaluate the extent of truthfulness of replies to questions about corruption.

5.     Utilising RRT techniques, while not assuring truthful responses, allows researchers to evaluate patterns of responses and to help identify potentially ‘reticent’ respondents.

6.     The results suggest a large under-reporting of corruption in firm-level surveys in Bangladesh and show that the types of firms providing non-responses are also those that tend to provide reticent responses: i.e., “the same unobservable factors leading firms to avoid answering questions on corruption also cause them to systematically under report the level of corruption when required to answer questions”.

7.     This indicates a positive relationship between the level of firm investment and the chance that a firm will provide potentially reticent responses to corruption questions, and suggests the need for caution in the design of surveys measuring corruption and the interpretation of the relationship between corruption and investment.

It is difficult to predict whether answers to questions about corruption in businesses are reticent or untruthful, but the use of RRTs in this area has found that the type of firm that is likely to provide reticent responses to questions about corruption is also likely to incur high levels of investment- this finding greatly helps improve interpretations of the relationship between corruption and investment and to design better surveys to get more accurate information about corruption in business firms.