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Legalization of Bribe Giving when Bribe Type is Endogenous

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  • Mandar Oak

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

Abstract

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.

Suggested Citation

  • Mandar Oak, 2013. "Legalization of Bribe Giving when Bribe Type is Endogenous," School of Economics and Public Policy Working Papers 2013-06, University of Adelaide, School of Economics and Public Policy.
    • Handle: RePEc:adl:wpaper:2013-06
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    File URL: https://media.adelaide.edu.au/economics/papers/doc/wp2013-06.pdf
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    References listed on IDEAS

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    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. Martin Dufwenberg & Giancarlo Spagnolo, 2015. "Legalizing Bribe Giving," Economic Inquiry, Western Economic Association International, vol. 53(2), pages 836-853, April.
    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.
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    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.
    8. Polinsky, A. Mitchell & Shavell, Steven, 2001. "Corruption and optimal law enforcement," Journal of Public Economics, Elsevier, vol. 81(1), pages 1-24, July.
    9. Basu, Kaushik, 2011. "Why, for a Class of Bribes, the Act of Giving a Bribe should be Treated as Legal," MPRA Paper 50335, University Library of Munich, Germany.
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    Cited by:

    1. 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.
    2. Ida Ferrara & Paul Missios, 2020. "Trust, ability‐to‐pay, and charitable giving," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(3), pages 583-629, June.
    3. Basu,Kaushik, 2015. "The republic of beliefs : a new approach to ?law and economics?," Policy Research Working Paper Series 7259, The World Bank.
    4. Martin Dufwenberg & Giancarlo Spagnolo, 2015. "Legalizing Bribe Giving," Economic Inquiry, Western Economic Association International, vol. 53(2), pages 836-853, April.
    5. Sergey V. Popov, 2016. "On Basu's Proposal: Fines Affect Bribes," Economics Working Papers 16-04, Queen's Management School, Queen's University Belfast.
    6. Hong, Fuhai & Yin, Zhendong, 2020. "Collusion, extortion and the government’s organizational structure," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 1-23.
    7. 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.
    8. Charles Angelucci & Antonio Russo, 2022. "Petty Corruption And Citizen Reports," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 63(2), pages 831-848, May.
    9. Lin Hu & Mandar Oak, 2023. "Can asymmetric punishment deter endogenous bribery," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 32(1), pages 3-21, January.
    10. Dmitriy Knyazev, 2023. "How to fight corruption: Carrots and sticks," Economic Inquiry, Western Economic Association International, vol. 61(2), pages 413-429, April.
    11. Jun Hu, 2021. "Asymmetric punishment, Leniency and Harassment Bribes in China: a selective survey," Working Papers hal-03119491, HAL.
    12. 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.
    13. Dasgupta, Utteeyo & Radoniqi, Fatos, 2023. "Republic of beliefs: An experimental investigation✰," Journal of Economic Behavior & Organization, Elsevier, vol. 214(C), pages 30-43.
    14. J. Atsu Amegashie, 2016. "The Welfare Effects of Consumers' Reports of Bribery," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 25(2), pages 516-534, April.

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    More about this item

    Keywords

    Corruption; Bribery; Harassment Bribes; Non-Harassment Bribes;
    All these keywords.

    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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