Asymmetric Punishment as an Instrument of Corruption Control

21 Pages Posted: 20 Apr 2016

See all articles by Karna Basu

Karna Basu

CUNY Hunter College

Kaushik Basu

Cornell University - Department of Economics; IZA Institute of Labor Economics; Brookings Institution

Tito Cordella

World Bank

Date Written: June 1, 2014

Abstract

The control of bribery is a policy objective in many developing countries. It has been argued that asymmetric punishments could reduce bribery by incentivizing whistle-blowing. This paper investigates the role played by asymmetric punishment in a setting where bribe size is determined by Nash bargaining, detection is costly, and detection rates are set endogenously. First, when detection rates are fixed, the symmetry properties of punishment are irrelevant to bribery. Bribery disappears if expected penalties are sufficiently high; otherwise, bribe sizes rise as expected penalties rise. Second, when detection rates are determined by the bribe-giver, a switch from symmetric to asymmetric punishment either eliminates bribery or allows it to persist with larger bribe sizes. Furthermore, when bribery persists, multiple bribe sizes could survive in equilibrium. The paper derives parameter values under which each of these outcomes occurs and discusses how these could be interpreted in the context of existing institutions.

Keywords: Public Sector Corruption & Anticorruption Measures, Crime and Society, Corruption & Anticorruption Law, Social Accountability, Business Ethics, Leadership and Values

Suggested Citation

Basu, Karna and Basu, Kaushik and Cordella, Tito, Asymmetric Punishment as an Instrument of Corruption Control (June 1, 2014). World Bank Policy Research Working Paper No. 6933. Available at SSRN: https://ssrn.com/abstract=2458219

Karna Basu (Contact Author)

CUNY Hunter College ( email )

695 Park Avenue
New York, NY 10065
United States

Kaushik Basu

Cornell University - Department of Economics ( email )

414 Uris Hall
Ithaca, NY 14853-7601
United States
607-255-2525 (Phone)
607-255-2818 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
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Brookings Institution ( email )

1775 Massachusetts Ave, NW
Washington, DC 20036
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Tito Cordella

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States
202-473-0043 (Phone)

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