Working Paper: NBER ID: w31286
Authors: Aimable Amani Lameke; Albert Malukisa Nkuku; Raúl Sánchez de la Sierra; Vincent Tanutama; Kristof Titeca
Abstract: This article provides evidence from the Congo that social relationships with state officials can decrease one social cost of corruption, in the context of public transport. We first document that police stops can lead to long bribe negotiations. In response, some drivers and officers have built relationships, allowing the drivers to take actions to attract passengers and negotiate passenger prices without the risk of being stopped, simply paying an unofficial set toll fee to the officers. We then examine a field experiment that re-routes drivers in randomly selected days to lines on which they do not have such ties. Re-routing decreases the surplus from driving (revenue minus repairs and gas). We cross-randomize third-party protection of the driver against police stops using existing common practices. The reduction of the surplus from re-routing is entirely driven by re-routing days in which the driver does not have such protection, thus the effect of re-routing is explained by driver-police interactions. We cross-randomize the time horizon of re-routing. When they expect to be re-routed only one day, drivers accept lower passenger prices and obtain less passengers, which leads to lower surplus, consistent with them trying to avoid detection by the officers. When they expect to be re-routed various days, drivers spend time negotiating with the officers and pay large bribes, destroying the surplus further, but yielding new relationships and higher revenue within three days. The findings suggest that relationships with state officials can form fast to reduce the transaction costs of the corrupt transaction and that these can amount to a very large social cost.
Keywords: corruption; social ties; transaction costs; public transport; field experiment
JEL Codes: D23; D73; D74
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| social relationships (Z13) | transaction costs of corruption (H57) |
| established relationships with police officers (P37) | transaction costs of corruption (H57) |
| rerouting drivers to lines without relationships (C69) | driving surplus (D46) |
| lack of relationships (J12) | negotiation effectiveness (C78) |
| formation of new relationships (J12) | efficiency of corrupt transactions (H57) |