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Corruption, norm enforcement and cooperation


Buffat, Justin; Senn, Julien (2018). Corruption, norm enforcement and cooperation. Working paper series / Department of Economics 260, University of Zurich.

Abstract

In many societies, the power to punish is granted to a centralized authority. While the punishment of free-riders has been shown to play an important role in the provision of public goods, corruption might strongly disrupt the ability of a centralized authority to foster cooperation. In this paper, we show that cooperation is reduced by 30% if the punishment authority can be bribed. Two concurrent channels lead to this result. First, low contributors use bribery as a way to tame the punishment authority. The punishment authority tends to reciprocate these bribes by assigning fewer punishment points. These low levels of punishment do not suffice to discipline the free-riders, who never raise their contributions. Second, bribery has negative spillovers on high contributors, who get discouraged and gradually decrease their contributions down to the level of low contributors. Overall, our paper highlights a potential peril of centralization: the sensitivity of the punishment authority to bribery.

Abstract

In many societies, the power to punish is granted to a centralized authority. While the punishment of free-riders has been shown to play an important role in the provision of public goods, corruption might strongly disrupt the ability of a centralized authority to foster cooperation. In this paper, we show that cooperation is reduced by 30% if the punishment authority can be bribed. Two concurrent channels lead to this result. First, low contributors use bribery as a way to tame the punishment authority. The punishment authority tends to reciprocate these bribes by assigning fewer punishment points. These low levels of punishment do not suffice to discipline the free-riders, who never raise their contributions. Second, bribery has negative spillovers on high contributors, who get discouraged and gradually decrease their contributions down to the level of low contributors. Overall, our paper highlights a potential peril of centralization: the sensitivity of the punishment authority to bribery.

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Additional indexing

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Department of Economics
Dewey Decimal Classification:330 Economics
JEL Classification:C91, D73, K42
Uncontrolled Keywords:Corruption, bribery, cooperation, public good, institutions
Language:English
Date:July 2018
Deposited On:14 Aug 2017 14:23
Last Modified:18 Jul 2018 14:40
Series Name:Working paper series / Department of Economics
Number of Pages:30
ISSN:1664-7041
Additional Information:Revised version ; Former title: Corruption and cooperation
OA Status:Green
Official URL:http://www.econ.uzh.ch/static/wp/econwp260.pdf
Related URLs:http://www.econ.uzh.ch/static/workingpapers.php

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