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November 27, 2023

Scandals and moral breakdown

Does exposure to news about local corruption increase dishonest behavior among citizens?

Tyler Smith

Source: jovanmandic

Well-functioning societies rely on honest citizens who do the right thing when no one is watching. But seeing others—especially people in positions of power—break the rules can lead to a wider breakdown in morality, according to a paper in the American Economic Journal: Applied Economics. 

Authors Giorgio Gulino and Federico Masera show that when Italians were exposed to news about local corruption they were more likely to steal from supermarkets.

Their results come from auditing nearly 300,000 checkouts from self-service supermarket scanners in Italy. The checkout process allowed customers to scan their own products while shopping, but gave them the opportunity to scan items of a lower value than those actually in their shopping carts.

The authors compared audits in cities where the corruption of local officials was widely publicized to audits in cities without a recent scandal.

Figure 1 from the authors’ paper shows what happened to the likelihood that customers underreported the value of their shopping cart before and after a local public scandal.

Figure 1 from Gulino and Masera (2023)

The x-axis indicates the number of days from news of a scandal, and the y-axis reports coefficient estimates from an event study that measured the probability of underreported purchases.

There is no difference in underreporting between cities before a scandal breaks, but there is a significant uptick in underreporting during the four days immediately after a local public scandal. After four days, underreporting returns to normal levels.

Overall, the authors calculate that news about local corruption scandals increased the probability that a shopper steals from a supermarket in the following days by at least 16 percent. The results demonstrate that, in addition to the direct economic costs of corruption, there are broader effects on the erosion of social norms.