3. Corruption

Question 1

Define corruption

Answer 1

Corruption is the abuse of entrusted power for private gain

Question 2

Positive reciprocity

Answer 2

Where people reciprocate kind actions

Question 3

Negative reciprocity

Answer 3

Where people reciprocate unkind actions

Question 4

What are the three essential features of corruption?

Answer 4

1. No enforceable contracts can be made
2. Negative external effects on public
3. Bribery is illegal with severe penalties attached to it- it is inherently risky

Question 5

Describe the Abbink, Irlenbusch & Renner 2002 design

Answer 5

P1 decides whether to transfer money to P2. P2 decides to accept or reject and then implement honest or corrupt policy. Three treatments of pure reciprocity, negative externality, and sudden death. 9 pairs in one session, played 30 rounds in fixed pairs. Subjects paid in cash.

Question 6

Describe the negative externality treatment in Abbink, Irlenbusch & Renner 2002

Answer 6

Corrupt choices cause social welfare loss of 3 for the other 8 pairs in the session. No feedback about extent of negative externality caused by other pairs until the end

Question 7

Explain the sudden death treatment in Abbink, Irlenbusch & Renner 2002

Answer 7

Corrupt choice leads to lottery with 0.003 chance of paid being “caught”, losing all accumulated payoff and being excluded from further play

Question 8

Results of Abbink, Irlenbusch & Renner 2002

Answer 8

-High transfers and high frequency of corruption in pure reciprocity treatment.
-The higher the transfer the higher the frequency of corrupt choices.
-No effect of negative externality. -Sudden death significantly decreases corruption

Question 9

Through what mechanisms might officials having higher salaries deter corruption?

Answer 9

Risk concerns- they have more to lose if caught
Reciprocity and fairness concerns- fair wage hypothesis

Question 10

Describe the design of the field experiment by Armantier & Boly 2011

Answer 10

-subjects hired as exam graders in Burkina Faso and paid up to 5000 FCFA
-paper 11 had banknote and post it note
-treatments of high/low wage high/low bribe as well as monitoring where 1(4) papers were checked for correctness

Question 11

Results of Armantier & Boly 2011

Answer 11

-Higher wages decrease bribe acceptance by 23%
-Higher wage examiners were more reluctant to let candidates fail.
-Doubling the bribe increased the probability of acceptance
-Graders who accept the bribe tend to fail bribe paper less often
-Monitoring deceased bribe acceptance but only significantly in low monitoring

Question 12

Describe the design of the Van Veldhuizen 2013 experiment

Answer 12

Adaption of AIR 2002 set up.
-Low/high wage treatment- public official’s wage is equal/higher than the bribers income
-Negative externality- a donation to a charity shrinks whenever the corrupt policy is chosen

Question 13

Results of Van Veldhuizen 2013

Answer 13

-Transferred bribes are similar in both treatments.
-In low/high wage 91%/38% accept bribes.
-High wage officials are 27 percentage points less likely to choose corrupt policy

Question 14

Describe the design of Abbink 2002

Answer 14

-Adaption of AIR 2002, roles of firm and public official as in AIR.
-Negative externalities are imposed on a passive type of subjects, the “workers”.
-Workers receive lump sum for task. -Treatments are lump sum and wage chosen so that workers earn more than public official or less than public official

Question 15

Results of Abbink 2002

Answer 15

No difference between high and low wage condition

Question 16

Describe the set up of Abbink 2004

Answer 16

Based on AIR 2002. Partners and strangers treatment to test if staff rotation can prevent corruption

Question 17

Results of Abbink 2004

Answer 17

Transfers drop dramatically in strangers and corrupt choice also drops dramatically

Question 18

Describe the design of Schickora 2011

Answer 18

-Modified bribery game AIR 2002. -Fixed group of players play 10 periods.
-There is a bribe splitting effect and group decision effect where players in role of public official decide as individuals or as a group of two subjects.
-Both have to agree whether to choose honest or corrupt policy

Question 19

Results of Schickora 2011

Answer 19

Bribe splitting slightly reduced corruption but group decision enhanced corruption substantially and public officials choose corrupt choices more frequently

Question 20

Can we give any weight to corruption studied in the lab?

Answer 20

Yes, Armantier & Boly replicated Burkina Faso study in lab in Montreal 2013 and told subjects all details. The scrutiny didn’t effect behaviour.
May be differences across cultures.

Question 21

What is a corruption trap and who introduced it?

Answer 21

Sarra & Wantchekan 2012
Countries can get stuck in a corruption trap when so much of the population are corrupt that a huge push is needed to eliminate the corruption. This doesn’t happen due to lack of money and incentives

Question 22

Why is the rejection rate of bribes higher in Armantier & Boly 2011 than in the lab?

Answer 22

Subjects thought grading task and bribe were real.
Since subjects are ex uni students they relate to the exam process
Subjects must have still felt they may get caught

Question 23

Other findings from Armantier & Boly 2011

Answer 23

-People who go to a place of worship everyday are 58% less likely to accept a bribe.
-Women respond to monitoring and punishment by failing the briber more often

Question 24

What is the state of corruption in the UK?

Answer 24

Perception of corruption is at its lowest ever score in the corruption perceptions index

Question 25

Why is no feedback given on the extent of damage by negative externality in Abbink, Irlenbusch & Renner 2002

Answer 25

-replicates real life where we might form beliefs about how corrupt society is but we don’t know for sure.
-it keeps the pair as an independent observation for statistical analysis

Question 26

Why is it a puzzle that the sudden death treatment reduces corruption in Abbink, Irlenbusch & Renner 2002?

Answer 26

Because subjects dramatically underestimate the probability of being caught yet still choose less corrupt policies

Question 27

3 main anti-corruption policies

Answer 27

-severe penalties
-high wages- reciprocity between employer and employee, and wage comparison
-staff rotation

Question 28

What papers can be referenced for a question on corruption?

Answer 28

-Abbink, Irelenbrusch & Renner (2002)
-Armantier & Boly (2011): Burkina faso and Montreal
-Van Veldhuizen (2013): low/high wage, charity
-Abbink (2002): income difference with workers
-Abbink (2004): partners vs strangers
-Schickora (2011): groups, brine splitting

Question 29

What questions can be referenced for a question on reciprocity?

Answer 29

Any corruption papers.
Incentive papers including:
-Kube Et Al (2012): library
-Brown Et Al (2004): 7 workers 10 firms
-Fehr & List (2004): trust game with CEOs
-Falk & Kosfield (2006): PA game with restriction