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Licensed Unlicensed Requires Authentication Published by De Gruyter November 30, 2019

Benford’s Law as an Indicator of Fraud in Economics

Karl-Heinz Tödter
From the journal German Economic Review

Abstract

Contrary to intuition, first digits of randomly selected data are not uniformly distributed but follow a logarithmically declining pattern, known as Benford’s law. This law is increasingly used as a ‘doping check’ for detecting fraudulent data in business and administration. Benford’s law also applies to regression coefficients and standard errors in empirical economics. This article reviews Benford’s law and examines its potential as an indicator of fraud in economic research. Evidence from a sample of recently published articles shows that a surprisingly large proportion of first digits, but not of second digits, contradicts Benford’s law.

Published Online: 2019-11-30
Published in Print: 2009-08-01

© 2019 by Walter de Gruyter Berlin/Boston