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Petty corruption and citizen feedback

Listed author(s):
  • Charles Angelucci

    ()

    (Columbia Business School)

  • Antonio Russo

    ()

    (ETH Zurich and CESifo)

Numerous countries are introducing citizen feedback schemes to tame corruption. We study how best to incorporate feedback in public officials’ incentives. The main novelty of our proposal is to allow citizens to directly influence officials’ pay. We consider a situation in which entrepreneurs must comply with regulation before undertaking a risky activity. Officials verify compliance to determine whether to grant permits, and may engage in either bribery or extortion. Without feedback, the government has no choice but to tolerate bribery, which leads to too many permits being granted and large negative externalities. By contrast, implementing a feedback scheme that (i) rewards entrepreneurs filing complaints and (ii) ties officials’ pay to these complaints makes deterring both bribery and extortion possible. Our proposed scheme does not require the government to be able to verify the accuracy of complaints. In an extension, we incorporate the role played by intermediaries, and show their involvement makes the feedback scheme even more valuable.

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File URL: http://www.ieb.ub.edu/phocadownload/documentostrabajo/2015/doc2015-25.pdf
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Paper provided by Institut d'Economia de Barcelona (IEB) in its series Working Papers with number 2015/25.

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Length: 62 pages
Date of creation: 2015
Handle: RePEc:ieb:wpaper:doc2015-25
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  1. Toke S. Aidt, 2009. "Corruption, institutions, and economic development," Oxford Review of Economic Policy, Oxford University Press, vol. 25(2), pages 271-291, Summer.
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  12. Sandra Sequeira & Simeon Djankov, 2013. "Corruption and firm behavior," LSE Research Online Documents on Economics 54321, London School of Economics and Political Science, LSE Library.
  13. Mikhail Drugov & John Hamman & Danila Serra, 2014. "Intermediaries in corruption: an experiment," Experimental Economics, Springer;Economic Science Association, vol. 17(1), pages 78-99, March.
  14. Burlando, Alfredo & Motta, Alberto, 2016. "Legalize, tax, and deter: Optimal enforcement policies for corruptible officials," Journal of Development Economics, Elsevier, vol. 118(C), pages 207-215.
  15. Fahad Khalil & Jacques Lawarrée & Sungho Yun, 2010. "Bribery versus extortion: allowing the lesser of two evils," RAND Journal of Economics, RAND Corporation, vol. 41(1), pages 179-198.
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