The Incentives to Engage in Corruption

By Gonzalo Forgues-Puccio

“Very few established institutions, governments and constitutions…are ever destroyed
by their enemies until they have been corrupted and weakened by their friends.”
Walter Lippmann

Assume that it is the middle of the summer and that you just bought your favourite ice cream from a shop. You remove the wrapping but there is no bin in sight. Hence, you have two options: you either look for a bin or just “accidentally drop” (throw) the ice cream’s wrapping on the pavement.

If you choose looking for a bin, you can either start eating your ice cream carrying the wrapping paper with you, or you can wait until your hands are free but your ice cream will certainly start to melt (tough choice). In both cases, the pleasure that you derive from eating your favourite ice cream will be diminished. In contrast, if you choose to throw the wrapping on the pavement, you can enjoy your ice cream fully from the start. What do you do? In my opinion the answer depends on economic, social and moral incentives.

If there is a police officer next to you then you will certainly look for a bin to avoid paying a fine for inappropriate disposal of rubbish (economic incentives). But what if there is no police around. Would you throw your ice cream’s wrapping on the pavement? Once again, it depends. If there are other people watching, then you will probably look for a bin anyway to avoid those “looks of disapproval” (social incentives). Finally, if you are all alone, you also have two options: you either throw the ice cream’s wrapping on the street, or you remember your mother telling to look for a bin and carry the wrapping in your hand until you find one. This in spite of being sure that no one will ever find out (moral incentives).

What does this story has to do with (public sector) corruption? This story has to do with corruption because bureaucrats in developing countries face this kind of dilemma every day. The only difference is that their misbehaviour has a greater negative impact on the wellbeing and opportunities of people, in particular the poor (1).

The economic models of corruption to date are based on the seminal paper of Becker (1968) by considering pure economic incentives to engage in corruption (2). In other words, it is assumed that bureaucrats will engage in corruption if the expected return of doing so is greater than the expected return of remaining honest. Little attention has been given to the role of culture in determining the incentives to engage in corrupt activities.

A recent paper by Fisman and Miguel (2007) suggests that culture may have an important role in explaining corruption incentives (3). The paper presents evidence on parking violations of diplomats in the city of New York (4). In principle, diplomatic immunity means that penalties for illegal parking cannot be enforced. Following the classical Beckerian approach we would expect that in a situation of zero enforcement all diplomats will take advantage of their positions and accumulate a large number of parking tickets. Even though this is true for diplomats from countries perceived as highly corrupt, diplomats from countries with very low levels of perceived corruption behave surprisingly well. Why do these diplomats act in such a way? Why, if they have the chance to benefit from their positions, do they not take the opportunity? A possible explanation may be related with social stigma – the social disapproval of personal behaviour that goes against established social norms. Another possible explanation is related to moral values.

These kinds of issues are, in my opinion, crucial for understanding the phenomenon of corruption and to design effective anticorruption policies. Economists should sit together with other social scientists to try to comprehend how individuals decide to engage in corruption. I am sure that the outcome of these discussions would be enlightening and provide useful insights to policy makers and international organizations dedicated to the fight against bribery and malfeasance.

What is behind corruption? Leave your thoughts below.

(*) Visiting researcher at the Institute for Advanced Development Studies, La Paz, Bolivia. The author happily receives comments at the following e-mail: gff2@st-andrews.ac.uk .

Ó Institute for Advanced Development Studies 2006. The opinions expressed in this newsletter are those of the author and do not necessarily coincide with those of the Institute.
(1) There is strong empirical evidence that corruption is negatively related with economic development and positively related with inequality.
(2) Becker, G.S., 1968. Crime and Punishment: An Economic Approach. Journal of Political Economy, 76, 169-217.
(3) Fisman, R. and E. Miguel, 2007. Corruption, Norms, and Legal Enforcement: Evidence from Diplomatic Parking Tickets. Journal of Political Economy, 115, 1020-1048.
(4) Parking violations by diplomats may be seen as acts of corruption, given that government officials are abusing their positions (diplomatic immunity) for private gain (illegal parking).