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Legalizing Bribes

  • Martin Dufwenberg

    (University of Arizona, University of Gothenburg, and the CESifo Network)

  • Giancarlo Spagnolo

    (SITE - Stockholm School of Economics, EIEF, Tor Vergata and CEPR)

Harassment bribes - payments people give in order not to be denied what they are legally entitled to - are common in for example India. Kaushik Basu recently made a radical proposal to reduce its occurrence: Legalize the act of giving the bribe and double the fine for accepting the bribe! We develop a formal model and delineate circumstances under which Basu's proposal works well or poorly. We discuss a modified scheme where immunity is conditional on reporting that we argue addresses the main issues raised against the proposal. We highlight complementarities between these schemes and other policies aimed at improving the accountability and performance of the public sector, and of law enforcement agencies in particular. We conclude discussing the implications for the fight of more harmful forms of corruption.

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Paper provided by Einaudi Institute for Economics and Finance (EIEF) in its series EIEF Working Papers Series with number 1117.

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Length: 30 pages
Date of creation: 2011
Date of revision: Dec 2011
Handle: RePEc:eie:wpaper:1117
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  1. Jennifer Hunt, 2006. "How Corruption Hits People When They Are Down," Departmental Working Papers 2006-07, McGill University, Department of Economics.
  2. Nathan H. Miller, 2009. "Strategic Leniency and Cartel Enforcement," American Economic Review, American Economic Association, vol. 99(3), pages 750-68, June.
  3. Abbink, Klaus & Dasgupta, Utteeyo & Gangadharan, Lata & Jain, Tarun, 2012. "Letting the briber go free: an experiment on mitigating harassment bribes," MPRA Paper 42176, University Library of Munich, Germany.
  4. Mookherjee, Dilip & Png, I P L, 1995. "Corruptible Law Enforcers: How Should They Be Compensated?," Economic Journal, Royal Economic Society, vol. 105(428), pages 145-59, January.
  5. Benjamin A. Olken & Rohini Pande, 2012. "Corruption in Developing Countries," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 479-509, 07.
  6. Banerjee, Abhijit V, 1997. "A Theory of Misgovernance," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1289-1332, November.
  7. Buccirossi, Paolo & Spagnolo, Giancarlo, 2006. "Leniency policies and illegal transactions," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1281-1297, August.
  8. Antonio Acconcia & Giovanni Immordino & Salvatore Piccolo & Patrick Rey, 2009. "Accomplice-Witnesses, Organized Crime and Corruption: Theory and Evidence from Italy," CSEF Working Papers 232, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 17 Oct 2009.
  9. José Apesteguia & Martin Dufwenberg & Reinhard Selten, 2003. "Blowing the Whistle," Bonn Econ Discussion Papers bgse9_2003, University of Bonn, Germany.
  10. Jeroen Hinloopen & Adriaan R. Soetevent, 2008. "Laboratory evidence on the effectiveness of corporate leniency programs," RAND Journal of Economics, RAND Corporation, vol. 39(2), pages 607-616.
  11. Mandar Oak, 2013. "Legalization of Bribe Giving when Bribe Type is Endogenous," School of Economics Working Papers 2013-06, University of Adelaide, School of Economics.
  12. Spagnolo, Giancarlo, 2006. "Leniency and Whistleblowers in Antitrust," CEPR Discussion Papers 5794, C.E.P.R. Discussion Papers.
  13. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
  14. Mailath, George J. & Samuelson, Larry, 2006. "Repeated Games and Reputations: Long-Run Relationships," OUP Catalogue, Oxford University Press, number 9780195300796, March.
  15. Martina Björkman & Jakob Svensson, 2009. "Power to the People: Evidence from a Randomized Field Experiment on Community-Based Monitoring in Uganda," The Quarterly Journal of Economics, MIT Press, vol. 124(2), pages 735-769, May.
  16. 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.
  17. Maria Bigoni & Sven-Olof Fridolfsson & Chloé Le Coq & Giancarlo Spagnolo, 2012. "fines, leniency, and rewards in antitrust," RAND Journal of Economics, RAND Corporation, vol. 43(2), pages 368-390, 06.
  18. Banerjee, A.V., 1997. "A Theory of Misgovernance," Working papers 97-4, Massachusetts Institute of Technology (MIT), Department of Economics.
  19. Bigoni, Maria & Fridolfsson, Sven-Olof & Le Coq, Chloé & Spagnolo, Giancarlo, 2012. "Trust and Deterrence," CEPR Discussion Papers 9002, C.E.P.R. Discussion Papers.
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