Police and military checkpoints are a familiar sight on many roadways in poor countries. Although some of the officers are legitimately keeping the peace, others are out to line their pockets with baksheesh. Despite their apparent banditry, though, these extortionists respond to market forces in much the same way as do lawful businesspeople, finds a new study from Indonesia.
“My research question was, Are corrupt officials just like any other economic actor?” says Benjamin A. Olken, an associate professor of economics at the Massachusetts Institute of Technology and the study’s lead author. “If they are, then we have a wealth of economic tools to help us analyze how bribes are going to behave. And we also have to think about the market structure of bribe-takers before designing reforms.”
Olken found that the corrupted officials on Aceh and North Sumatra’s highways indeed act like uncoordinated business monopolies–a situation that is bad for consumers because it raises the price of each bribe. It would be better to consolidate bribe-takers under the umbrella of a single monopolist who sets prices and coordinates activities. For instance, the “one-stop shop” reforms of many governments—which allow citizens to get, say, six permits from one office, rather than six permits from six different offices—“might lead to smaller bribes,” he says.
Working against this advice is the common anticorruption practice of “going after the kingpin,” Olken says. “A coordinated corrupt organization, such as a cartel, might be less costly than an uncoordinated group of corrupt officials.” In other words, putting even more method in grafters’ badness would be better for their victims.
For their first-ever survey of bribery in the field, Olken and his coauthor, Patrick Barron of the World Bank, hired local surveyors to ride in Indonesian trucks that ferried cargo between the provinces of Aceh and North Sumatra. These surveyors then recorded every bribe that truck drivers paid at checkpoints and weigh stations over the course of 304 trips. “Most of the time, the officials didn’t even bother to trump up a charge,” says Olken.
To create a natural experiment, the researchers exploited the end of Aceh’s 30-year civil war, which resulted in the withdrawal of more than 30,000 Indonesian police and military from Aceh Province. This withdrawal also reduced the number of checkpoints, allowing the researchers to examine how changes in the market—that is, the number and location of the checkpoints—affected the size of bribes.
Olken and Barron first found that, on average, drivers paid about 20 bribes per trip for a total of $40—about 13 percent of each trip’s total cost. Yet just as a lack of competition allows businesses to command higher prices, the drop in the number of checkpoints after the war meant less competition between officials, and therefore a hike in the amount of each bribe. The study also uncovered that officials levied greater graft from drivers who seemed manageable to pay more, such as drivers of newer trucks or more valuable cargo. And corrupt officials practiced another well-documented form of price discrimination: When they had weapons at their sides or comrades at their backs, they used their greater negotiating power to extract higher bribes.
Benjamin A. Olken and Patrick Barron, “The Simple Economics of Extortion: Evidence from Trucking in Aceh,” Journal of Political Economy, April 2009.
Read more stories by Alana Conner.