Legalizing Bribes

30 Pages Posted: 21 Dec 2011

See all articles by Martin Dufwenberg

Martin Dufwenberg

University of Arizona - Department of Economics

Giancarlo Spagnolo

Stockholm School of Economics (SITE); Centre for Economic Policy Research (CEPR); University of Rome 'Tor Vergata'; EIEF

Date Written: December 19, 2011


Harassment bribes - payments people give in order not to be denied what they are legally entitled to - are common in for example India. Kaushik Basu recently made a 'radical' proposal to reduce its occurrence: Legalize the act of giving the bribe and double the fine for accepting the bribe! We develop a formal model and delineate circumstances under which Basu's proposal works well or poorly. We discuss a modified scheme where immunity is conditional on reporting that we argue addresses the main issues raised against the proposal. We highlight complementarities between these schemes and other policies aimed a improving the accountability and performance of the public sector, and of law enforcement agencies in particular. We conclude discussing the implications for the fight of more harmful forms of corruption.

Keywords: bribes, corruption, governance, immunity, law enforcement, leniency, whistleblowers

JEL Classification: D73, K42, O17

Suggested Citation

Dufwenberg, Martin and Spagnolo, Giancarlo, Legalizing Bribes (December 19, 2011). Eller College of Management Working Paper No. 11-09, Available at SSRN: or

Martin Dufwenberg (Contact Author)

University of Arizona - Department of Economics ( email )

McClelland Hall
Tucson, AZ 85721-0108
United States

Giancarlo Spagnolo

Stockholm School of Economics (SITE) ( email )

P.O. Box 6501

HOME PAGE: http://

Centre for Economic Policy Research (CEPR)

United Kingdom

University of Rome 'Tor Vergata' ( email )

Faculty of Economics - DEI
Via Columbia 2
Rome, RM 00133

EIEF ( email )

Via Due Macelli, 73
Rome, 00187


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