The Social Costs of Deregulation in a Fight Against Corruption: A Case Study on Driver's Licenses In Mexico City

Abstract

Various anti-corruption tools have been proposed in the literature. In this article, we focus on deregulation. By removing red tape, the opportunities for bribery are reduced. At the same time, however, social costs can increase due to reemergence of inefficiencies that the regulation was intended to target in the first place. We analyze data from Mexico City, where a driving test was abolished to combat petty corruption prevalent in testing centers. A natural concern is that roads would become more dangerous. We find that this concern is unwarranted; if anything, roads have become safer.

Keywords: anti-corruption, deregulation, driving license, Mexico.