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Bribery: Who Pays, Who Refuses, What Are The Payoffs?

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  • Jennifer Hunt

    ()

  • Sonia Laszlo

    ()

Abstract

We provide a theoretical framework for understanding when an official angles for a bribe, when a client pays, and the payoffs to the client’s decision. We test this frame work using a new data set on bribery of Peruvian public officials by households. The theory predicts that bribery is more attractive to both parties when the client is richer, and we find empirically that both bribery incidence and value are increasing in household income. However, 65% of the relation between bribery incidence and income is explained by greater use of officials by high–income households, and by their use of more corrupt types of official. Compared to a client dealing with an honest official, a client who pays a bribe has a similar probability of concluding her business, while a client who refuses to bribe has a probability 16 percentage points lower. This indicates that service improvements in response to a bribe merely offset service reductions associated with angling for a bribe, and that clients refusing to bribe are punished. We use these and other results to argue that bribery is not a regressive tax.

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Bibliographic Info

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp792.

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Length: pages
Date of creation: 01 Sep 2005
Date of revision:
Handle: RePEc:wdi:papers:2005-792

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Keywords: Corruption; bribery; institutions; governance.;

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Citations

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Cited by:
  1. Blackburn, Keith & Forgues-Puccio, Gonzalo F., 2010. "Financial liberalization, bureaucratic corruption and economic development," Journal of International Money and Finance, Elsevier, vol. 29(7), pages 1321-1339, November.
  2. Rodrigues-Neto, José A., 2014. "On corruption, bribes and the exchange of favors," Economic Modelling, Elsevier, vol. 38(C), pages 152-162.
  3. Jennifer Hunt, 2006. "How Corruption Hits People When They Are Down," Departmental Working Papers 2006-07, McGill University, Department of Economics.
  4. Mendez, Fabio & Sepulveda, Facundo, 2013. "Optimal Government Regulations And Red Tape In An Economy With Corruption," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 54(1), pages 51-77, June.
  5. Zvika Neeman & Daniele Paserman & Avi Simhon, 2006. "Corruption and Openness," 2006 Meeting Papers 164, Society for Economic Dynamics.
  6. Hunt, Jennifer & Laszlo, Sonia, 2012. "Is Bribery Really Regressive? Bribery’s Costs, Benefits, and Mechanisms," World Development, Elsevier, vol. 40(2), pages 355-372.
  7. Jennifer Hunt, 2005. "Why Are Some Public Officials More Corrupt Than Others?," William Davidson Institute Working Papers Series wp790, William Davidson Institute at the University of Michigan.
  8. Chongwoo Choe & Ratbek Dzhumashev & Asadul Islam & Zakir H. Khan, 2011. "Corruption and Network in Education: Evidence from the Household Survey Data in Bangladesh," Development Research Unit Working Paper Series 08-11, Monash University, Department of Economics.
  9. B. Burcin Yurtoglu & Christine Zulehner, 2007. "The gender wage gap in top corporate jobs is still there," Vienna Economics Papers 0701, University of Vienna, Department of Economics.
  10. Lavallée, Emmanuelle & Roubaud, François, 2009. "Corruption and the informal sector in Sub-Saharan Africa," Economics Papers from University Paris Dauphine 123456789/5135, Paris Dauphine University.
  11. Fabio Mendez & Facundo Sepulveda, 2006. "Optimal Government Regulations and Red Tape in an Economy with Corruption," CEPR Discussion Papers 515, Centre for Economic Policy Research, Research School of Economics, Australian National University.

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