Is more competition always better? An experimental study of extortionary corruption

Dmitry Ryvkin and Danila Serra

No wp2015_10_01, Working Papers from Department of Economics, Florida State University

Abstract: 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 an increase in overlapping jurisdictions reduces 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. We conduct an extortionary bribery experiment where clients apply for a license from one of many available offices and officials can demand a bribe on top of the license fee. By manipulating the number of available offices and the size of search costs we are able to assess whether increasing competition reduces extortionary corruption. We find that, if search costs are unaffected, increasing the number of providers may actually increase corruption. In particular, our results show that increasing competition has either no eeffect (if search costs are high) or a positive effect (if search costs are low) on bribe demands. We compare our findings to those obtained in a standard market environment and find evidence of different search behaviors in the two settings.

Keywords: competition; extortionary corruption; experiment (search for similar items in EconPapers)
JEL-codes: C91 D49 D73 (search for similar items in EconPapers)
Pages: 38
Date: 2015-10
New Economics Papers: this item is included in nep-com, nep-exp, nep-law, nep-pke and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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https://coss.fsu.edu/econpapers/wpaper/wp2015_10_01.pdf First version, 2015-10 (application/pdf)

Related works:
Journal Article: IS MORE COMPETITION ALWAYS BETTER? AN EXPERIMENTAL STUDY OF EXTORTIONARY CORRUPTION (2019)
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