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Asymmetric Punishment as an Instrument of Corruption Control

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  • KARNA BASU
  • KAUSHIK BASU
  • TITO CORDELLA

Abstract

The control of bribery is a policy objective in many developing countries. It has been argued that asymmetric punishments could reduce bribery by incentivizing whistle-blowing. This paper investigates the role played by asymmetric punishment in a setting where bribe size is determined by Nash bargaining, detection is costly, and detection rates are set endogenously. First, when detection rates are fixed, the symmetry properties of punishment are irrelevant to bribery. Bribery disappears if expected penalties are sufficiently high; otherwise, bribe sizes rise as expected penalties rise. Second, when detection rates are determined by the bribe-giver, a switch from symmetric to asymmetric punishment either eliminates bribery or allows it to persist with larger bribe sizes. Furthermore, when bribery persists, multiple bribe sizes could survive in equilibrium. The paper derives parameter values under which each of these outcomes occurs and discusses how these could be interpreted in the context of existing institutions.
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Suggested Citation

  • Karna Basu & Kaushik Basu & Tito Cordella, 2016. "Asymmetric Punishment as an Instrument of Corruption Control," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 18(6), pages 831-856, December.
  • Handle: RePEc:bla:jpbect:v:18:y:2016:i:6:p:831-856
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    File URL: http://hdl.handle.net/10.1111/jpet.2016.18.issue-6
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    References listed on IDEAS

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    1. Nicolas Melissas, 2009. "Corruption, Extortion, and the Boundaries of the Law," Journal of Law, Economics, and Organization, Oxford University Press, vol. 25(2), pages 442-471, October.
    2. Kalai, Ehud & Smorodinsky, Meir, 1975. "Other Solutions to Nash's Bargaining Problem," Econometrica, Econometric Society, vol. 43(3), pages 513-518, May.
    3. Basu, Kaushik & Bhattacharya, Sudipto & Mishra, Ajit, 1992. "Notes on bribery and the control of corruption," Journal of Public Economics, Elsevier, vol. 48(3), pages 349-359, August.
    4. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
    5. 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.
    6. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
    7. Lambsdorff, Johann & Nell, Mathias, 2007. "Fighting corruption with asymmetric penalties and leniency," Center for European, Governance and Economic Development Research Discussion Papers 59, University of Goettingen, Department of Economics.
    8. 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.
    9. Christoph Engel & Sebastian Goerg & Gaoneng Yu, 2012. "Symmetric vs. Asymmetric Punishment Regimes for Bribery," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2012_01, Max Planck Institute for Research on Collective Goods, revised May 2013.
    10. Anant, T. C. A. & Mukherji, Badal & Basu, Kaushik, 1990. "Bargaining without convexity : Generalizing the Kalai-Smorodinsky solution," Economics Letters, Elsevier, vol. 33(2), pages 115-119, June.
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    Cited by:

    1. Roberto Burguet & Juan José Ganuza & José Garcia Montalvo, 2016. "The microeconomics of corruption. A review of thirty years of research," Economics Working Papers 1525, Department of Economics and Business, Universitat Pompeu Fabra.
    2. Perrotta Berlin, Maria & Spagnolo, Giancarlo & Qin, Bei, 2015. "Leniency, Asymmetric Punishment and Corruption: Evidence from China," SITE Working Paper Series 34, Stockholm School of Economics, Stockholm Institute of Transition Economics, revised 25 May 2017.
    3. Gamba, Astrid & Immordino, Giovanni & Piccolo, Salvatore, 2018. "Corruption, organized crime and the bright side of subversion of law," Journal of Public Economics, Elsevier, vol. 159(C), pages 79-88.
    4. Avinash K. Dixit, 2015. "How Business Community Institutions Can Help Fight Corruption," World Bank Economic Review, World Bank Group, vol. 29(suppl_1), pages 25-47.
    5. repec:kap:annfin:v:15:y:2019:i:1:d:10.1007_s10436-018-0329-0 is not listed on IDEAS
    6. repec:spr:jbecon:v:88:y:2018:i:7:d:10.1007_s11573-018-0893-9 is not listed on IDEAS
    7. Astrid, Gamba & Giovanni, Immordino & Salvatore, Piccolo, 2016. "Organized Crime and the Bright Side of Subversion of Law," Working Papers 336, University of Milano-Bicocca, Department of Economics, revised 17 May 2016.
    8. Dimant, Eugen & Deutscher, Christian, 2014. "The Economics of Corruption in Sports – The Special Case of Doping," MPRA Paper 60566, University Library of Munich, Germany.
    9. Sergey V. Popov, 2016. "On Basu's Proposal: Fines Affect Bribes," Economics Working Papers 16-04, Queen's Management School, Queen's University Belfast.
    10. Dhammika Dharmapala & Vikramaditya Khanna, 2017. "Stock Market Reactions to India's 2016 Demonetization: Implications for Tax Evasion, Corruption, and Financial Constraints," CESifo Working Paper Series 6707, CESifo Group Munich.
    11. Adriana Gama & Isabelle Maret & Virginie Masson, 2019. "Endogenous heterogeneity in duopoly with deterministic one-way spillovers," Annals of Finance, Springer, vol. 15(1), pages 103-123, March.
    12. Basu,Kaushik, 2015. "The republic of beliefs : a new approach to ?law and economics?," Policy Research Working Paper Series 7259, The World Bank.

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