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The Industrial Organization of Extortionary Corruption: Evidence from Two Experiments (Center for Institutional Studies Research Seminar)

Speaker: Danila Serra (Assistant Professor, Department of Economics, Southern Methodist University)

Speaker: Danila Serra (Assistant Professor, Department of Economics, Southern Methodist University)

November 20, ThursdayMyasnitskaya 24, building 3, room 424, 18.30. 

Theoretical and empirical research on corruption has flourished in the last three decades; however, identifying successful anti-corruption policies remains a challenge. Indeed, while the existing literature tends to point at changes in incentive systems relying on top-down monitoring and strict rule enforcement, such changes are unfeasible in countries where penalties can easily be bypassed through the payment of bribes. In our program of research we focus on novel anti-corruption policies that instead rely on changes in the organization of the bureaucracy in charge of providing government services, and on citizens’ involvement in the fight against corruption through online reports. In one paper, we test the effectiveness of an anti-corruption policy that is often discussed among practitioners: an increase in competition among officials providing the same good or service. In particular, we investigate whether overlapping jurisdictions reduce extortionary corruption, i.e., bribe demands for the provision of services that clients are entitled to receive. We overcome measurement and identification problems by addressing our research question in the laboratory.  Our experimental findings show that increasing competition has either no effect or a positive effect on bribe demands, depending on how costly it is to search for an honest or low-bribe-demanding official. In a second paper, which is still a work in progress, we employ a laboratory experiment to assess whether bottom-up institutions that rely on voluntary and anonymous reports of bribe demands could act as an effective anti-corruption tool, and if this is the case, how they should be best designed to maximize their impact.



Working paper: download