On the Optimal Location of the Anti-Corruption Agency

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On the Optimal Location of the Anti-Corruption
Agency

• Bryane Michael, Oxford University

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Motivation Donor supported ACAs
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ACAs blooming across the worldsome less
successful
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Why is optimal location a problem?
Presidents Office
PMs Office
SAI
Ombundmans Office
Parliamentary Office
Justice
Interior
Finance
Public administration school Planning
Agency Procurement body Etc.
Civil Society Councils Business Assocs.
Many different areas to locate ACA work.
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Jaccuse

• Many ACAs established with donor funds have been
  insufficiently thought-out. Their location and
  activity have been the result of convenience or
  common sense rather than hard and rigorous
  thinking about the best place to put them.

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Overview Where to place the ACA?

• Literature Overview
• Transactions cost-based approaches
• Organisational Theory approaches
• Other issues
• A general theory of ACA location
• Extensions

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Advice - Literature
Much practical advice but little judgment
building.
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Static versus dynamic efficiency
guns
Push the frontier with AC knowledge
Transparency and accountability Get us to the
frontier
butter
Literature doesnt look at pushing the AC
frontier
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New Institutional Economics Transactions Costs
viscosity
Existence and location of organisation
established to minimise transactions costs
Information problems contracting
Agency problems
ACA should minimise costs of doing AC work
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Property Rights and Incentives
incentives
PRs
unit
Relative allocation of PRs

• Property right theory
• ACA gives property rights to organisations
• Those who can maximise the value of those
  property rights should be given control over
  ACA.
• Can weight entities by the efficiency of
  control over property rights

ACA should maximise incentives (returns) to doing
AC work
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Gravity Model of Location

• Minimise the weight and the distance
• Simultaneously Max (PR incentives) and Min
  (transact costs)

Unit should be located closer to the action
Corruption is everywhere homogeneous,
anti-corruption activity which is unequally
distributed
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Slight Reformulation A Network Perspective

• Without the unit, there are 2n possible
  linkages
• With the unit, reduces complexity
• Depending on network structure, decentralisation
  or centralisation better

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Organisational Issues
boundary spanning
specialisation
Choose organisational form which maximises
returns to both boundary Spanning and
specialisation
Optimal allocation depends on returns to each
activity and complementarities
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Boundary Spanning v. Specialisation?
prosecution
investigation
audit
Civil society narking
Police should know something about audit but
not too much because costly
Know not enough
Know too much
Not just common sense, should be guided by hard
data.
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The Problem

• Two Decisions
• Location?
• Parliament
• Executive
• Separate
• Civil Society
• Centralisation
• Separate Unit
• Tight Co-ordination
• Loose Co-ordination
• Laissez-faire

State
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An Outline of the Solution
centralisation
High in Govt Low in Government Outside the Government
Transactions costs (ability to self co-ordinate) Low Low High
Capacity to act on incentives Medium Low High
Political conflicts High Low High
Location depends on key factors
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Defining an Optimal Location
Value Of centralisation
S
Min (tc) Max (pr)
D
Politics and autonomy
Level of Anti-Corruption Activity
Assessing the costs and benefits.
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Comparative Statics Demand Shift
Value Of centralisation
Increase in need for programme
S
D
D
Level of Anti-Corruption Activity
More cats imply more herding required
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Comparative Statics Supply Shift
Value Of centralisation
S
S
D
Level of Anti-Corruption Activity
More capacity implies less need for herding
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The Problem Revisited
At the top
In the Ministries
State
Decentralised
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The Problem Revisited (2)
State
Toward Organisation set A
Toward Organisation set B
In the centre
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The Problem Revisited (2)
At the top
In the Ministries
Toward Organisation set A
State
Toward Organisation set B
In the centre
Decentralised
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Extensions I Matching C to AC
corruption
State
Corruption adjusted location
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Extensions II Political Attraction and Repulsion
foes
friends
State
Either higher or set up two agencies Can also
set up a two-colored institutional arrangement
(math theory)
Corruption adjusted location
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Extensions (2) Knowledge Changes Everything
If one of ACAs tasks is to build capacity
(develop knowledge), then have repulsion
rather than attraction rule
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Dynamics
centralisation
Small then big fish
Seek and destroy
Big then small fish
time
Time profile of the optimal location changes over
time
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Complications

• Legal basis
• History
• Personalities
• Strategic behaviour (if they know why you locate
  it, they will try to act for or against)
• Institutionalisation
• International dimension