The Simple Economics of Extortion: Evidence from Trucking in Aceh

Benjamin Olken and Patrick Barron ()

No 13145, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper tests whether the behavior of corrupt officials is consistent with standard industrial organization theory. We designed a study in which surveyors accompanied truck drivers on 304 trips along their regular routes in two Indonesian provinces, during which we directly observed over 6,000 illegal payments to traffic police, military officers, and attendants at weigh stations. Using plausibly exogenous changes in the number of police and military checkpoints, we show that market structure affects the level of illegal payments, finding evidence consistent with double-marginalization and hold-up along a chain of vertical monopolies. Furthermore, we document that the illegal nature of these payments does not prevent corrupt officials from extracting additional revenue using complex pricing schemes, including third-degree price discrimination and a menu of two-part tariffs. Our findings illustrate the importance of considering the market structure for bribes when designing anti-corruption policy.

JEL-codes: D73 O12 (search for similar items in EconPapers)
Date: 2007-06
New Economics Papers: this item is included in nep-sea
Note: IO PE POL
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

Published as Benjamin A. Olken & Patrick Barron, 2009. "The Simple Economics of Extortion: Evidence from Trucking in Aceh," Journal of Political Economy, University of Chicago Press, vol. 117(3), pages 417-452, 06.

Downloads: (external link)
http://www.nber.org/papers/w13145.pdf (application/pdf)

Related works:
Working Paper: The Simple Economics of Extortion: Evidence from Trucking in Aceh (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:13145

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w13145

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().