Research Spotlight

Combating Corruption Effectively

Announcing the government 1031 anti-corruption hotline where citizens can report demands for small bribes, the Aam Aadmi Party government in Delhi said “This announcement makes every Delhi citizen an anti-corruption inspector”.

A paper co-authored by Professor Tarun Jain of the Indian School of Business (ISB) provides new and interesting insights on the impact of different policy scenarios on those who initiate and respond to harassment bribes. Specifically, the paper examines the effectiveness of using asymmetric liability, where bribe-takers are culpable but bribe-givers have legal immunity, to combat harassment bribes. Results from the experiment indicate that while this policy has the potential to significantly reduce corrupt practices, weak economic incentives for the bribe-giver, or retaliation by bribe- takers can reduce its effectiveness.

In a forthcoming paper titled, “"Letting the Briber Go Free: An Experiment on Mitigating Harassment Bribes” (Journal of Public Economics, Volume 111, March 2014, forthcoming issue) Professor Tarun Jain along with Klaus Abbink (Monash University), Utteeyo Dasgupta (Franklin and Marshall College) and Lata Gangadharan (Monash University) indicate that while asymmetric impunity schemes such as the ones proposed by Kaushik Basu (economist and former Chief Economic Advisor to the Government of India at the Ministry of Finance) are a promising avenue to consider to combat corruption, such strategies need to be complemented with other measures to have the desired disciplining effect on bribe takers.

Adopting the combination of a survey and a novel experimental method, the study probes the effectiveness of the proposed asymmetric culpability rule in combating harassment bribery (sometimes called “extortionary” corruption). Through the experimental design, the authors also examine citizens’ behaviour when faced with a distribution of bribe amounts, providing better understanding of decision-making in the context of corruption. Further, the authors evaluate the impact of monetary and non-monetary factors that can influence the propensity for whistle-blowing.

According to the researchers, the findings suggest that asymmetric liability schemes could be more effective with complementary measures such as policies to rotate officials in different posts to reduce the impact of retaliation against citizens who report bribe demands. They conclude that while this might prove to be a credible step towards fighting harassment bribes, in to order to realise the full benefits of this policy the institutional set-up would have to be further bolstered by improving the whistle-blower protection, reducing the power of officials, and promoting better prosecution of the accused.