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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.

Suggested Citation

  • Spagnolo, Giancarlo & Dufwenberg, Martin, 2011. "Legalizing Bribes," SITE Working Paper Series 13, Stockholm School of Economics, Stockholm Institute of Transition Economics, revised 12 May 2013.
    • Handle: RePEc:hhs:hasite:0013
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    1. How to fight corruption
      by Economic Logician in Economic Logic on 2012-02-06 21:25:00

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    1. 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.

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    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
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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