How effective are whistleblower laws in combating corruption?

A new discussion paper by Rajeev Goel and Michael Nelson looks at the effectiveness of US whistleblower laws in combating corruption. The abstract is below:

Whistleblower laws are becoming important governance tools in both the public and private sectors. To examine the effectiveness of whistleblower laws and their awareness, this study creates a unique internet-based measure of awareness about whistleblower laws and provisions, focusing on the United States. Placing the analysis within the larger corruption literature, our results show that greater whistleblower awareness results in more observed corruption and this holds across specifications. Internet awareness of whistleblower laws appears to be more effective at exposing corruption than the quantity and quality of whistleblower laws themselves.

And a few excerpts from the conclusion, which highlights the role of the internet:

Couching the empirical analysis within the extant literature on the causes of corruption, our results show that greater internet awareness about whistleblower laws results in more corruption coming to light and being successfully prosecuted. In terms of magnitude, an increase in whistleblower hits by one sample standard deviation would increase average corruption convictions per million population by nearly thirty over a decade-long period. Interestingly, the internet awareness about corruption seems relatively more effective at exposing corruption than the quantity and quality of whistleblower laws themselves. Further, the direct government resources allocated to controlling crime and the indirect efforts via whistleblower awareness are found to be complementary. These findings are generally robust to alternate specifications, including an allowance for potential endogeneity of whistleblower awareness, and to broader measures of internet whistleblower awareness. (…)

The results for the United States in terms of the effectiveness of whistleblower laws in exposing corruption should be of interest to policy makers everywhere, especially in other nations that do not have adequate protections for whistleblowers. As internet diffusion grows and the digital divide narrows, it would be interesting to see a further impact of whistleblower awareness and, more generally, of the internet.

Read the full paper here [PDF].