Coercion, vertical trust and entrepreneurism in bureaucracies: evidence from the Nazi Holocaust

Breton and Wintrobe (1982) develop a non-traditional (modern) model of bureaucratic management that is based on the notion of “vertical trust” – the notion that subordinates “trade services” that advance the goals of the bureau''s leadership in return for various “informal payments,” none of which are codified in formal contracts between the two sets of parties. Applying the model to the Nazi bureaucracy explains how Nazi functionaries, such as Adolf Eichmann, acted as bureaucratic entrepreneurs in accomplishing goals relating to “the Jewish question,” and ultimately “the Final Solution,” for their superiors, such as Adolf Hitler and Heinrich Himmler (Breton and Wintrobe, 1986). As an extension of prior research, the current study examines the hypothesis that the use these vertical trust relationships within the borders of their minor Axis partners (e.g., Hungary) worked more effectively for the Germans than coercion, which would have been required to a greater degree within the borders of occupied European countries (e.g., Holland). Specifically, our estimates suggest that, ceteris paribus, owing to their use of vertical trust networks the minor Axis countries each contributed about 152,000 more European Jews to the Nazi Holocaust apparatus than their German-occupied European country counterparts, wherein the Nazis relied more heavily on coercion.