Lessons from the Lab: Fighting Corruption

Corruption is common around the world. The 2016-17 Global Corruption Barometer survey by Transparency International reveals that one in four people globally had to pay a bribe for public services in the last 12 months. The estimated annual total of corrupt transactions across the globe exceeds one trillion US$. Despite the obvious negative effects of corruption on economic growth, development, and political institutions, fighting against corruption remains a challenge. In this post, I describe the results of recent research in which the co-authors and I use lab experiments with human subjects to test the effectiveness of two innovative anti-corruption measures: the introduction of competition among public officials and an anonymous online platform where citizens can leave feedback about their experiences with corrupt transactions.

Why is corruption so entrenched, despite the worldwide social and political demand for its eradication, as evidenced by the continual introduction of new national and international anti-corruption regulation? Within the standard monitoring and punishment paradigm, introduced into economics by Gary Becker, corruption, like any other crime, can be reduced via law enforcement. This approach, however, only works in rule of law societies where the incidents of corruption are rare and laws are generally well enforced through a functioning judicial system, separation of powers and free press.

At the other end of the spectrum are societies plagued by systemic corruption, where corruption is organized and permeates the very fabric of government, including the executive branch and the judiciary, and law enforcement is arbitrary and used as an instrument of extortion and power capture by the ruling elites. Simply put, in a systemically corrupt society, it is extremely difficult to eradicate corruption via regulation and law enforcement because the very officials whose task it is to fight corruption are themselves corrupt. This is true even when the government at the very top is sincere in its anti-corruption stance, at least initially, which is often the case for newly elected popular governments. In such circumstances, it is critical for the government to enact anti-corruption reforms that do not rely on top-down monitoring and punishment of corrupt officials. One possibility is the introduction of competition between public officials. The idea is rather straightforward and relies on the basic Economics 101 argument that competition among multiple sellers of the same product should drive prices down.

To provide some context, imagine a citizen applying for a passport or renewing a driver’s license. She pays a fee, fills out all the necessary paperwork and submits it to a government office. However, the public official refuses to issue the document unless the citizen also pays a bribe. If there is only one office the citizen can go to, for example, based on her mailing address, then the citizen has no choice but to pay the bribe. [Of course, she can try to complain to a higher-level official or go to court, but in a systemically corrupt society these actions may end up costing the citizen more, and costs may not be limited to money.]  But if there are two (or more) offices where the citizen can apply, then there is scope for competition between public officials because the citizen will go to the office where the official asks for a lower bribe. In practice, this can be achieved by creating overlapping jurisdictions for officials. For example, citizens can be allowed to submit their paperwork to any office in the region as opposed to only the office in their zip code. Under ideal conditions, bribes can be completely eliminated without any additional monitoring. There are reasons, however, for competition to fail to produce the desired results. For example, citizens may not be patient or vigilant enough to search for the least corrupt office; or officials can collude and covertly set bribes like a cartel. In our experiments, we impose a cost on citizens if they would like to submit their application to another office and also allow public officials to talk and coordinate their bribes. The results are encouraging. Competition survives the stress-tests and leads to a substantial reduction, albeit not complete eradication, of bribe demands.

Another bottom-up approach to fighting corruption is the introduction of online platforms where citizens can report their experiences being harassed by public officials into paying bribes. One such platform, I paid a bribe, had been launched several years ago in India and has since spread to more than a dozen countries. Its main goal is stated as a way to expose and shame public officials. However, just like price aggregation websites make consumer search more effective in standard markets, a reporting system like that can, at least in principle, work as a search engine for citizens to look for the least corrupt officials, and reduce corruption via competitive pressure. It is, however, very difficult to assess how effective these platforms are in reducing corruption. In our experiments, we take the idea to the test by allowing subjects in the role of private citizens to post messages about their experiences on a publicly observable bulletin board. By varying the functionality of the board, we find that the “I paid a bribe” platform may not be sufficient to significantly lower bribery. While citizens rarely post false information, strategic lying by public officials, when they are allowed to post, is wide-spread. For a reporting platform to be successful, posting must be specific and restricted to citizens only. In order to implement such a platform, especially in systemically corrupt societies, an independent third-party authentication system must be put in place that citizens can trust is not going to be infiltrated by officials or their proxies.

Corruption is one of the “wicked” problems facing many societies. Simple punishment and regulation is often ineffective and more creative, bottom-up approaches to fighting corruption have been proposed. Testing these approaches in the field is next to impossible as it is difficult to find a government able and willing to experiment on its citizens. Social science laboratory experiments provide a way to assess effective tools in the battle against systemic corruption.

 

Additional Reading

The 2004 United Nations Convention against Corruption, https://www.unodc.org/documents/brussels/UN_Convention_Against_Corruption.pdf

Becker, G. (1968) Crime and punishment: An economic approach. Journal of Political Economy, 76, 169-217.

Shleifer, A. and R. Vishny. (1993). Corruption.  Quarterly Journal of Economics, 108(3), 599-617.

Ryvkin, D. and D. Serra. (2018). Corruption and competition among bureaucrats: An experimental study. Journal of Economic Behavior and Organization, forthcoming (https://www.sciencedirect.com/science/article/pii/S0167268117303761).

Ryvkin, D., Serra, D. and J. Tremewan. (2017). I paid a bribe: I paid a bribe: An experiment on information sharing and extortionary corruption. European Economic Review, 94, 1-22 (https://www.sciencedirect.com/science/article/pii/S0014292117300284).


Dmitry Ryvkin is an associate professor in the Economics Department.

 

 

 


The featured image is from CorruptionWatch.org.

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