Abstract

http://ssrn.com/abstract=906752
 
 

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Does Corruption Produce Unsafe Drivers?


Marianne Bertrand


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Simeon Djankov


New Economic School (NES)

Rema Hanna


Harvard University - Harvard Kennedy School (HKS)

Sendhil Mullainathan


Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

June 2006

NBER Working Paper No. w12274

Abstract:     
We follow 822 applicants through the process of obtaining a driver%u2019s license in New Delhi, India. To understand how the bureaucracy responds to individual and social needs, participants were randomly assigned to one of three groups: bonus, lesson, and comparison groups. Participants in the bonus group were offered a financial reward if they could obtain their license fast; participants in the lesson group were offered free driving lessons. To gauge driving skills, we performed a surprise driving test after participants had obtained their licenses. Several interesting facts regarding corruption emerge. First, the bureaucracy responds to individual needs. Those who want their license faster (e.g. the bonus group), get it 40% faster and at a 20% higher rate. Second, the bureaucracy is insensitive to social needs. The bonus group does not learn to drive safely in order to obtain their license: in fact, 69% of them were rated as %u201Cfailures%u201D on the independent driving test. Those in the lesson group, despite superior driving skills, are only slightly more likely to obtain a license than the comparison group and far less likely (by 29 percentage points) than the bonus group. Detailed surveys allow us to document the mechanisms of corruption. We find that bureaucrats arbitrarily fail drivers at a high rate during the driving exam, irrespective of their ability to drive. To overcome this, individuals pay informal %u201Cagents%u201D to bribe the bureaucrat and avoid taking the exam altogether. An audit study of agents further highlights the insensitivity of agents%u2019 pricing to driving skills. Together, these results suggest that bureaucrats raise red tape to extract bribes and that this corruption undermines the very purpose of regulation.

Number of Pages in PDF File: 43

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Date posted: June 8, 2006  

Suggested Citation

Bertrand, Marianne and Djankov, Simeon and Hanna, Rema and Mullainathan, Sendhil, Does Corruption Produce Unsafe Drivers? (June 2006). NBER Working Paper No. w12274. Available at SSRN: http://ssrn.com/abstract=906752

Contact Information

Marianne Bertrand (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-834-5943 (Phone)
HOME PAGE: http://gsbwww.uchicago.edu/fac/marianne.bertrand/vita/cv_0604.pdf
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-588-0341 (Phone)
617-876-2742 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Simeon Djankov
New Economic School (NES) ( email )
47 Nakhimovsky Prospekt
Moscow, 117418
Russia
HOME PAGE: http://www.nes.ru
Rema Hanna
Harvard University - Harvard Kennedy School (HKS) ( email )
79 John F. Kennedy Street
Cambridge, MA 02138
United States
Sendhil Mullainathan
Harvard University - Department of Economics ( email )
Littauer Center
Cambridge, MA 02138
United States
617-496-2720 (Phone)
617-495-7730 (Fax)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-588-1473 (Phone)
617-876-2742 (Fax)
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