Institutional, idiosyncratic and physiological
aspects of corruption
Tarek-Taher Jaber López
Aurora Garcı́a-Gallego
LEE and Economics Department, Jaume I University, Castellón, Spain
Nikolaos Georgantzı́s
∗
GLOBE and Economics Department, University of Granada, and LEE, University
Jaume I, Castellón, Spain
Georgina Michailidou
LEE and Economics Department, Jaume I University, Castellón, Spain
Pandelis Perakakis
LEE and Economics Department, Jaume I University, Castellón, Spain
Abstract
We experimentally test a model of corruption where firms compete
for obtaining the license for a project, and a town planner decides on
the firm to obtain the license. Each firm has to split its resources between quality and a bribe. Quality entails a social externality that
endogenously depends on the quality of the winner’s project, positively
∗
Presenting author: Economics Department, Universidad de Granada, Campus de la Cartuja, 18011-Granada (Spain). E-mail: [email protected]. Phone number: +34964387628.
Fax. +34964728591.
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affecting all players. The bribe is unfair (increases inequality), inefficient (it costs more to the sender than contributes to the receiver’s
utility) and antisocial. We report results from three studies. In the first
study, the basic model is implemented showing that subjects exhibit
a preference for quality and aversion to bribes. In the second study
two new features are introduced: A citizen who is a passive receiver of
the consequences of the potentially corrupt transaction and an option
available to losers to investigate the deal between the planner and the
winner of the licence. If the investigation reveals no bribe, the accusing
firm loses all its profit, otherwise the accused firm and planner lose their
profits. Despite the few times that the option is actually used bribes
fall dramatically and efficiency increases, especially when a citizen is
also present. Ethical behavior is associated with altruistic preferences
and higher degrees of risk aversion. In the third study, we report results
from a skin conductance control of subjects acting in the baseline and
the whistle-blowing treatments. First, we show that firm-subjects acting in the absence of a whistle-blowing threat feel a higher emotional
arousal when acting ethically than when sending bribes to the planners.
The contrary is true in the whistle-blowing treatment. The anticipation
of the loser’s decision to blow the whistle also causes a higher arousal to
those who have won a licence after bribing than those who did without
bribing the planner. Planners show no arousal in either the decision or
the anticipation moments of their and others’ actions, confirming that
passive bribery has no observable physiological impact.
Keywords: bribery, quality, corruption, experimental economics,
physiology, skin conductance.
JEL classification: C91,C92,D62,D2,D3,K42
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