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Legalization of Bribe Giving when Bribe Type Is Endogenous


  • Amrita Dillon


A recent paper, Basu argues that for a class of bribes, called harassment bribes, legalization of bribe giving, but not bribe taking, will reduce bribery. We examine the applicability of Basu's insight in an environment in which the type of the bribe—harassment or nonharassment—is endogenously determined, and it is not feasible to legalize the giving of nonharassment bribes. We find that in such an environment Basu's proposal, in and of itself, yields mixed results: in one case it reduces even the prevalence of nonharassment bribes, and improves social welfare. However, in another case it is shown to be counter-productive, i.e., it reduces social welfare while failing to eliminate bribery. Our analysis finds parameter values that determine which of the two cases will prevail, and points to additional policies aimed at strengthening the legal institutions which, in conjunction with Basu's proposal, will help reduce bribery.

Suggested Citation

  • Amrita Dillon & MANDAR OAK, 2015. "Legalization of Bribe Giving when Bribe Type Is Endogenous," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(4), pages 580-604, August.
  • Handle: RePEc:bla:jpbect:v:17:y:2015:i:4:p:580-604

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    References listed on IDEAS

    1. Buccirossi, Paolo & Spagnolo, Giancarlo, 2006. "Leniency policies and illegal transactions," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1281-1297, August.
    2. Steven Shavell & A. Mitchell Polinsky, 2000. "The Economic Theory of Public Enforcement of Law," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 45-76, March.
    3. Benjamin A. Olken & Rohini Pande, 2012. "Corruption in Developing Countries," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 479-509, July.
    4. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters,in: Essays in the Economics of Crime and Punishment, pages 1-54 National Bureau of Economic Research, Inc.
    5. George J. Stigler, 1974. "The Optimum Enforcement of Laws," NBER Chapters,in: Essays in the Economics of Crime and Punishment, pages 55-67 National Bureau of Economic Research, Inc.
    6. Polinsky, A. Mitchell & Shavell, Steven, 2001. "Corruption and optimal law enforcement," Journal of Public Economics, Elsevier, vol. 81(1), pages 1-24, July.
    7. Abbink, Klaus & Dasgupta, Utteeyo & Gangadharan, Lata & Jain, Tarun, 2014. "Letting the briber go free: An experiment on mitigating harassment bribes," Journal of Public Economics, Elsevier, vol. 111(C), pages 17-28.
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    Cited by:

    1. Martin Dufwenberg & Giancarlo Spagnolo, 2015. "Legalizing Bribe Giving," Economic Inquiry, Western Economic Association International, vol. 53(2), pages 836-853, April.
    2. Basu, Karna & Basu, Kaushik & Cordella, Tito, 2014. "Asymmetric punishment as an instrument of corruption control," Policy Research Working Paper Series 6933, The World Bank.
    3. Sergey V. Popov, 2016. "On Basu's Proposal: Fines Affect Bribes," Economics Working Papers 16-04, Queen's Management School, Queen's University Belfast.
    4. Emil Pain, 2015. "Regional and National Diversit y as a Factor of Public Administration Theory Development: Problem Statement," Public administration issues, Higher School of Economics, issue 5, pages 34-49.

    More about this item

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law


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