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Legalizing Bribe Giving

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  • Martin Dufwenberg
  • Giancarlo Spagnolo
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    Abstract

    A model of ’harassment bribes,’ paid for services one is entitled to, is developed to analyze the proposal to legalize paying these bribes while increasing fines on accepting them. We explore performance as regards corruption deterrence and public service provision. Costs of verifying reports make the scheme more effective against larger bribes and where institutions’ quality is higher. A modified scheme, where immunity is conditional on reporting, addresses some key objections. The mechanism works better against more distortionary forms of corruption than harassment bribes, provided monetary rewards can compensate bribers for losing the object of the corrupt exchange. Results highlight strong complementarities with policies aimed at improving independence and accountability of law enforcers. JEL Classification Numbers: D73, K42, O17 Keywords: Bribes, Corruption, Immunity, Law enforcement, Leniency, Whistleblowers

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    Bibliographic Info

    Paper provided by IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University in its series Working Papers with number 515.

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    Date of creation: 2014
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    Handle: RePEc:igi:igierp:515

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    1. Buccirossi, Paolo & Spagnolo, Giancarlo, 2005. "Leniency Policies and Illegal Transactions," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5442, C.E.P.R. Discussion Papers.
    2. Mandar Oak, 2013. "Legalization of Bribe Giving when Bribe Type is Endogenous," School of Economics Working Papers, University of Adelaide, School of Economics 2013-06, University of Adelaide, School of Economics.
    3. Jennifer Hunt, 2006. "How Corruption Hits People When They Are Down," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan wp836, William Davidson Institute at the University of Michigan.
    4. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 35(3), pages 1320-1346, September.
    5. Martina Björkman & Jakob Svensson, 2009. "Power to the People: Evidence from a Randomized Field Experiment on Community-Based Monitoring in Uganda," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 124(2), pages 735-769, May.
    6. Acconcia, Antonio & Immordino, Giovanni & Piccolo, Salvatore & Rey, Patrick, 2013. "Accomplice-Witness and Organized Crime: Theory and Evidence from Italy," IDEI Working Papers, Institut d'Économie Industrielle (IDEI), Toulouse 777, Institut d'Économie Industrielle (IDEI), Toulouse.
    7. Klaus Abbink & Utteeyo Dasgupta & Lata Gangadharan & Tarun Jain, 2013. "Letting the Briber Go Free: An Experiment on Mitigating Harassment Bribes," Development Research Unit Working Paper Series, Monash University, Department of Economics 62-13, Monash University, Department of Economics.
    8. Maria Bigoni & Sven-Olof Fridolfsson & Chloé Le Coq & Giancarlo Spagnolo, 2012. "fines, leniency, and rewards in antitrust," RAND Journal of Economics, RAND Corporation, RAND Corporation, vol. 43(2), pages 368-390, 06.
    9. Basu, Kaushik & Bhattacharya, Sudipto & Mishra, Ajit, 1992. "Notes on bribery and the control of corruption," Journal of Public Economics, Elsevier, Elsevier, vol. 48(3), pages 349-359, August.
    10. Mookherjee, Dilip & Png, I P L, 1995. "Corruptible Law Enforcers: How Should They Be Compensated?," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 105(428), pages 145-59, January.
    11. Bigoni, Maria & Fridolfsson, Sven-Olof & Le Coq, Chloé & Spagnolo, Giancarlo, 2012. "Trust and Deterrence," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9002, C.E.P.R. Discussion Papers.
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