Bribery: Who Pays, Who Refuses, What are the Payoffs?

35 Pages Posted: 25 May 2006  

Jennifer Hunt

Rutgers University; McGill University - Department of Economics; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics; National Bureau of Economic Research (NBER)

Sonia Laszlo

McGill University - Department of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: September 2005

Abstract

We provide a theoretical framework for understanding when an official angles for a bribe, when a client pays, and the payoffs to the client's decision. We test this frame work using a new data set on bribery of Peruvian public officials by households. The theory predicts that bribery is more attractive to both parties when the client is richer, and we find empirically that both bribery incidence and value are increasing in household income. However, 65% of the relation between bribery incidence and income is explained by greater use of officials by high-income households, and by their use of more corrupt types of official. Compared to a client dealing with an honest official, a client who pays a bribe has a similar probability of concluding her business, while a client who refuses to bribe has a probability 16 percentage points lower. This indicates that service improvements in response to a bribe merely offset service reductions associated with angling for a bribe, and that clients refusing to bribe are punished. We use these and other results to argue that bribery is not a regressive tax.

Keywords: Corruption, bribery, institutions, governance

JEL Classification: H4, K4, O1

Suggested Citation

Hunt, Jennifer and Laszlo, Sonia, Bribery: Who Pays, Who Refuses, What are the Payoffs? (September 2005). William Davidson Institute Working Paper No. 792. Available at SSRN: https://ssrn.com/abstract=904346 or http://dx.doi.org/10.2139/ssrn.904346

Jennifer Hunt (Contact Author)

Rutgers University ( email )

75 Hamilton Street
New Brunswick, NJ 08901
United States

McGill University - Department of Economics ( email )

855 Sherbrooke Street West
Leacock Building Room 443
Montreal, QC H3A 2T7
Canada
514-398-6866 (Phone)

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Sonia Laszlo

McGill University - Department of Economics ( email )

855 Sherbrooke Street West
Montreal, QC H3A 2T7
Canada

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