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Legalizing Bribe Giving

  • Martin Dufwenberg
  • Giancarlo Spagnolo

A model of ’harassment bribes,’ paid for services one is entitled to, is developed to analyze the proposal to legalize paying these bribes while increasing fines on accepting them. We explore performance as regards corruption deterrence and public service provision. Costs of verifying reports make the scheme more effective against larger bribes and where institutions’ quality is higher. A modified scheme, where immunity is conditional on reporting, addresses some key objections. The mechanism works better against more distortionary forms of corruption than harassment bribes, provided monetary rewards can compensate bribers for losing the object of the corrupt exchange. Results highlight strong complementarities with policies aimed at improving independence and accountability of law enforcers. JEL Classification Numbers: D73, K42, O17 Keywords: Bribes, Corruption, Immunity, Law enforcement, Leniency, Whistleblowers

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Paper provided by IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University in its series Working Papers with number 515.

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Date of creation: 2014
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Handle: RePEc:igi:igierp:515
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  1. Benjamin A. Olken & Rohini Pande, 2011. "Corruption in Developing Countries," NBER Working Papers 17398, National Bureau of Economic Research, Inc.
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  8. Buccirossi, Paolo & Spagnolo, Giancarlo, 2005. "Leniency Policies and Illegal Transactions," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 74, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
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  10. Mailath, George J. & Samuelson, Larry, 2006. "Repeated Games and Reputations: Long-Run Relationships," OUP Catalogue, Oxford University Press, number 9780195300796, March.
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  12. Klaus Abbink & Utteeyo Dasgupta & Lata Gangadharan & Tarun Jain, 2013. "Letting the Briber Go Free: An Experiment on Mitigating Harassment Bribes," Monash Economics Working Papers 62-13, Monash University, Department of Economics.
  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. 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.
  15. 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.
  16. Nathan H. Miller, 2009. "Strategic Leniency and Cartel Enforcement," American Economic Review, American Economic Association, vol. 99(3), pages 750-68, June.
  17. 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.
  18. Spagnolo, Giancarlo, 2006. "Leniency and Whistleblowers in Antitrust," CEPR Discussion Papers 5794, C.E.P.R. Discussion Papers.
  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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