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The Simple Economics of Extortion: Evidence from Trucking in Aceh

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Author Info
Benjamin A. Olken
Patrick Barron

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Abstract

This paper tests whether the behavior of corrupt officials is consistent with standard industrial organization theory. We designed a study in which surveyors accompanied Indonesian truck drivers on 304 trips, during which they observed over 6,000 illegal payments to police, soldiers, and weigh station attendants. Using plausibly exogenous changes in the number of checkpoints, we show that market structure affects the level of illegal payments. We further show that corrupt officials use complex pricing schemes, including third-degree price discrimination and a menu of two-part tariffs. Our findings illustrate the importance of considering the market structure for bribes when designing anticorruption policy. (c) 2009 by The University of Chicago. All rights reserved..

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File URL: http://www.journals.uchicago.edu/doi/pdf/10.1086/599707
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Article provided by University of Chicago Press in its journal Journal of Political Economy.

Volume (Year): 117 (2009)
Issue (Month): 3 (06)
Pages: 417-452
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Handle: RePEc:ucp:jpolec:v:117:y:2009:i:3:p:417-452

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  2. McMillan, John & Zoido, Pablo, 2004. "How to Subvert Democracy: Montesinos in Peru," Research Papers 1851r, Stanford University, Graduate School of Business. [Downloadable!]
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  6. Shepard, Andrea, 1991. "Price Discrimination and Retail Configuration," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 30-53, February. [Downloadable!] (restricted)
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  11. Baumol, William J & Bradford, David F, 1970. "Optimal Departures from Marginal Cost Pricing," American Economic Review, American Economic Association, vol. 60(3), pages 265-83, June. [Downloadable!] (restricted)
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  14. Jakob Svensson, 2003. "Who Must Pay Bribes And How Much? Evidence From A Cross Section Of Firms," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 207-230, February. [Downloadable!] (restricted)
  15. Raymond Fisman & Shang-Jin Wei, 2004. "Tax Rates and Tax Evasion: Evidence from "Missing Imports" in China," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 471-500, April. [Downloadable!] (restricted)
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  16. Schmalensee, Richard, 1981. "Output and Welfare Implications of Monopolistic Third-Degree Price Discrimination," American Economic Review, American Economic Association, vol. 71(1), pages 242-47, March. [Downloadable!] (restricted)
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  17. Benjamin A. Olken, 2007. "Monitoring Corruption: Evidence from a Field Experiment in Indonesia," Journal of Political Economy, University of Chicago Press, vol. 115, pages 200-249. [Downloadable!] (restricted)
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    Other versions:
    • Andrei Shleifer & Robert W. Vishny, 1993. "Corruption," NBER Working Papers 4372, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  21. Borenstein, Severin & Rose, Nancy L, 1994. "Competition and Price Dispersion in the U.S. Airline Industry," Journal of Political Economy, University of Chicago Press, vol. 102(4), pages 653-83, August. [Downloadable!] (restricted)
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  22. Chang-Tai Hsieh & Enrico Moretti, 2006. "Did Iraq Cheat the United Nations? Underpricing, Bribes, and the Oil for Food Program," The Quarterly Journal of Economics, MIT Press, vol. 121(4), pages 1211-1248, November. [Downloadable!] (restricted)
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  23. Eugenio J. Miravete, 2005. "The Welfare Performance Of Sequential Pricing Mechanisms ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(4), pages 1321-1360, November. [Downloadable!] (restricted)
  24. Ritva Reinikka & Jakob Svensson, 2004. "Local Capture: Evidence From a Central Government Transfer Program in Uganda," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 678-704, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Abhijit V. Banerjee & Esther Duflo, 2008. "The Experimental Approach to Development Economics," NBER Working Papers 14467, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Paul Niehaus, 2009. "Corruption Dynamics: The Golden Goose Effect," Working Papers id:2016, esocialsciences.com. [Downloadable!]
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