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Legalization of Bribe Giving when Bribe Type is Endogenous

Listed author(s):
  • Mandar Oak


    (School of Economics, University of Adelaide, SA 5005)

In a provocative paper, Basu (2011) argues that for a class of bribes, called harassment bribes, legalization of bribe giving will reduce bribery. We examine the applicability of Basu's insight in a realistically complex environment in which the type of the bribe---harassment or non-harassment---is endogenously determined, and it is not feasible to legalize the giving of non-harassment bribes. We find that in such environment Basu's proposal, in and of itself, yields mixed results: in some cases it can reduce even the prevalence of non-harassment bribes and improve social welfare. However, in other cases it will be counter-productive, i.e., it can reduce social welfare while failing to eliminate bribery. Our analysis points to additional policies aimed at strengthening the legal institutions which, in conjunction with Basu's proposal, will help reduce bribery.

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Paper provided by University of Adelaide, School of Economics in its series School of Economics Working Papers with number 2013-06.

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Length: 35 pages
Date of creation: Apr 2013
Handle: RePEc:adl:wpaper:2013-06
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