Saturday, May 11, 2013

Are women less corrupt?

A version of this article appeared in the New Zealand Herald on September 27, 2012.

Recently I took part in a panel debate at the University of Auckland following the showing of the film “The Inside Job” which indicts investment banks for risky strategies that almost certainly led to the current global financial crisis. The film also holds responsible a number of leading economists for aiding and abetting behavior that led to the crisis.

During the panel discussion one of my colleagues in economics made an interesting point. She suggested that one notable fact in all of this is that all the people responsible for engaging in such questionable behavior are men! Her implication is that women would not have engaged in similar behavior. That got me thinking – is she right?

Regardless of how one views the actions that led to the financial crisis, it seems clear that some of the people involved must have realized at some point that the behavior they were engaging in were at the very least, ethically questionable, if not downright corrupt. To take one example, in October 2011 the New York Times reported that “Citigroup agreed to pay $285 million to settle charges that it misled investors in a $1 billion derivatives deal tied to the United States housing market, then bet against investors as the housing market began to show signs of distress....The S.E.C. said that the $285 million would be returned to investors in the deal. ...The commission said that Citigroup exercised significant influence over the selection of $500 million of assets in the deal’s portfolio. Citigroup then took a short position against those mortgage-related assets, an investment in which Citigroup would profit if the assets declined in value. The company did not disclose to the investors to whom it sold the collateralized debt obligation that it had helped to select the assets or that it was betting against them.”

So are women less corrupt or less ethically challenged than men? My research suggests that the answer is yes.

Researchers have approached this question from different directions. One group of researchers from the World Bank looks at whether increasing female presence in a country’s parliament leads to reduced corruption. Using international measures of the level of corruption in a country they find that across a range of countries and after controlling for various other factors that could have an effect, increased female representation in parliament does reduce corruption.  

Another group of researchers from academia and the World Bank use data provided by the World Values Survey. They look at data from 61 countries around the world where respondents were asked about the acceptability of a series of dishonest or illegal behaviours such as claiming government benefits one is not entitled to, avoiding fare on public transports, cheating on taxes, buying something that one knows was stolen, someone accepting a bribe in the course of their duties, throwing away litter in a public place, driving under the influence of alcohol and so on.   For each of these situations, respondents were asked to indicate their responses on a 1 to 10 scale where 1 indicates that the behaviour can “never be justified” while 10 indicates that it can “always be justified”. For all questions, a significantly higher proportion of women than men believe that the behavior described is never justifiable. In fact for all questions the proportion of women who think that the behaviour described is not justifiable is always larger than the corresponding proportion of men.

One obvious criticism of the above approach is that people may or may not respond truthfully when asked hypothetical questions. That is to say they might say bribe taking is unacceptable when asked about it but then change their behavior and indulge in bribery when the opportunity arises and especially if there is actual money on the table.

So along with my students at the University of Auckland as well as colleagues from the University of Melbourne and the World Bank I designed a set of economic experiments. Here participants take part in a simulated corruption game where they are asked to play the role of a firm, a government official or a citizen. The firm can give a bribe to the official which if accepted by the latter leads to a large increase in the payoff to both of them at the expense of the citizen whose earnings go down. The citizen can then meekly accept this or if the citizen wishes he can choose to forego some more money in order to punish the firm and the official. For every dollar that the citizen decides to forego, we reduce the firm’s and the official’s earnings by $3 each. The basic idea is along the lines that the citizen can engage in costly litigation to take the firm and the official to court. This costs the citizen time and money but if successful can hurt the firm and the official even more.

But the important point is that there was real (and often substantial amounts of money) involved! Essentially we were asking people to put their money where their mouth is. We carried out our experiments in Auckland, Bangkok, Jakarta, Kolkata, Melbourne, New Delhi and Singapore.

Subsequently a number of other researchers have used modified versions of our game to look for gender differences in behavior and carried out experiments in other locations such as Nairobi, Kenya and Barcelona, Spain.

So what do we find? We find that indeed the preponderance of the evidence suggests that in these simulated corruption situations female “firms” are far less likely to offer bribes and female “citizens” are much more likely to punish the firms and officials who engage in bribery.

Organizations around the world are beginning to respond to these findings. In mid-1999, Mexico City took away the right to write traffic tickets (a major source of bribery) from male police officers and gave that right exclusively to an elite corps of women traffic officers who were deemed less corrupt than their male counterparts. Around the same time the city of Lima in Peru enacted a similar reform. In a number of developing countries around the world there have been proposals for reserving parliamentary seats for women in an attempt to increase female representation in government. In India, for instance, some seats are reserved for female candidates in elections to local bodies such as municipal and village councils. A bill to do so at the level of the national parliament is still pending.

But our findings come with a strange twist. The finding that women are less tolerant of corruption is more pronounced in developed nations than in developing nations! This is a pity because corruption is a far more pervasive problem in developing nations than in developed ones and corruption often is the primary cause behind why those countries are poor. The reasons behind why this difference may arise and how one might address this are beyond the scope of this article.

But the bottom-line: yes, I think my colleague is right. We may have averted the crisis if, for instance, there were more women in positions of power at the investment banks!

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