Corruption (with a Hierarchy)

08.12.2021 14:15 – 15:45

INSTITUTE OF ECONOMICS AND ECONOMETRICS SEMINAR /



Abstract:

We gain access inside a traffic police battalion to analyze the economics of corruption organized in a hierarchy. We show that the vertical component of corruption accounts for most of corruption. Corruption is vertically organized as follows: the commanders enable street-level agents to collect bribes. In exchange, the agents occasionally transfer money to their commander and escort an agreed number of drivers every day to the police station for the commanders to take bribes-|known as the "quota system.'' The bribes collected by commanders through this quota system constitute 75% of total bribe revenue. We then present the results of two experiments conducted inside the traffic police to characterize the role of the hierarchy for corruption. First, we experimentally double the income of street-level agents. We find that 29% of that extra income is informally taxed by their commanders. We use a simple model to analyze the implications of this level of taxation for the level of the corruption-proof efficiency wage. Second, we experimentally reduce the quota. We find that decreasing the quota reduces harassment of drivers and traffic jams. This suggests that the vertical organization of corruption has a negative social cost, in addition to any cost decentralized corruption may have. The findings emphasize the importance of vertical corruption to understand the scale and costs of corruption for society and suggest that even states that appear weak may be strong to raise informal revenue through sophisticated designs.

Lieu

Bâtiment: Uni Mail

Uni Mail - Bd du Pont-d'Arve 40 - 1205 Geneva

Room: M 3250, 3rd floor

entrée libre