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Legalizing Bribes

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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 a 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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File URL: http://swopec.hhs.se/hasite/papers/hasite0013.pdf
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Paper provided by Stockholm Institute of Transition Economics, Stockholm School of Economics in its series SITE Working Paper Series with number 13.

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Length: 30 pages
Date of creation: 19 Dec 2011
Date of revision: 06 Apr 2012
Handle: RePEc:hhs:hasite:0013
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Stockholm Institute of Transition Economics, Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden

Phone: (+46 8) 736 9670
Fax: (+46 8) 31 64 22
Web page: http://www.hhs.se/site/

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  1. Mookherjee, Dilip & Png, I P L, 1995. "Corruptible Law Enforcers: How Should They Be Compensated?," Economic Journal, Royal Economic Society, vol. 105(428), pages 145-159, January.
  2. Benjamin A. Olken & Rohini Pande, 2012. "Corruption in Developing Countries," Annual Review of Economics, Annual Reviews, vol. 4(1), pages 479-509, 07.
  3. Banerjee, A.V., 1997. "A Theory of Misgovernance," Working papers 97-4, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Spagnolo, Giancarlo, 2006. "Leniency and Whistleblowers in Antitrust," CEPR Discussion Papers 5794, C.E.P.R. Discussion Papers.
  5. Hunt, Jennifer, 2007. "How corruption hits people when they are down," Journal of Development Economics, Elsevier, vol. 84(2), pages 574-589, November.
  6. Jose Apesteguia & Martin Dufwenberg & Reinhard Selten, 2007. "Blowing the Whistle," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 31(1), pages 143-166, April.
  7. 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.
  8. 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, Oxford University Press, vol. 124(2), pages 735-769.
  9. Bigoni, Maria & Fridolfsson, Sven-Olof & Le Coq, Chloé & Spagnolo, Giancarlo, 2012. "Trust and Deterrence," CEPR Discussion Papers 9002, C.E.P.R. Discussion Papers.
  10. 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, 08.
  11. Antonio Acconcia & Giovanni Immordino & Salvatore Piccolo & Patrick Rey, 2014. "Accomplice Witnesses and Organized Crime: Theory and Evidence from Italy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 116(4), pages 1116-1159, October.
  12. 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.
  13. 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.
  14. Buccirossi, Paolo & Spagnolo, Giancarlo, 2006. "Leniency policies and illegal transactions," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1281-1297, August.
  15. Abhijit V. Banerjee, 1997. "A Theory of Misgovernance," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1289-1332.
  16. 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.
  17. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
  18. Nathan H. Miller, 2009. "Strategic Leniency and Cartel Enforcement," American Economic Review, American Economic Association, vol. 99(3), pages 750-768, June.
  19. Mailath, George J. & Samuelson, Larry, 2006. "Repeated Games and Reputations: Long-Run Relationships," OUP Catalogue, Oxford University Press, number 9780195300796.
  20. 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.
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