Cooperation, Bribery, and the Rule of Law

Esteban Freidin, Katrin Schmelz and Urs Fischbacher

No 129, TWI Research Paper Series from Thurgauer Wirtschaftsinstitut, Universität Konstanz

Abstract: Corruption is a severe impediment to economic development and societal cooperation. Fighting corruption is challenging, not least as it is intertwined with the rule of law. Thus, causal evidence on institutional conditions that amplify or protect from its negative externalities is hard to identify. In a laboratory experiment, we investigate how the effect of corruption on cooperation interacts with the rule of law, i.e., whether punishment rules protect cooperators. In a repeated public goods game, citizens can contribute, and an official can punish. We vary whether bribery is possible and whether high contributors are protected from punishment (strong rule of law) or not (weak rule of law). Bribery deteriorates cooperation only under a weak rule of law, but not when punishment rules protect high contributors from harassment bribery -- even if citizen-driven (collusive) bribery persists. Strong institutions limiting officials' power are crucial to protect from the societal costs of corruption.

Keywords: bribery; cooperation; corruption; institutions; punishment; rule of law; development economics (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-exp and nep-law
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Persistent link: https://EconPapers.repec.org/RePEc:twi:respas:0129

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