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Comments on "Asymmetric Punishment as an Instrument of Corruption Control"

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Comments by Jenny Simon on paper "Asymmetric Punishment as an Instrument of Corruption Control" presented by Tito Cordella at the SITE Corruption Conference, 31 August 2015.

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Comments on "Asymmetric Punishment as an Instrument of Corruption Control"

  1. 1. Discussion: Asymmetric Punishment as an Instrument of Corruption Control Jenny Simon (SITE) August 31, 2015 Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 1 / 7
  2. 2. A simple model of corruption Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 2 / 7
  3. 3. A simple model of corruption A specific class of corruption: Harassment bribery Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 2 / 7
  4. 4. A simple model of corruption A specific class of corruption: Harassment bribery A specific policy instrument: Asymmetric punishment Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 2 / 7
  5. 5. A simple model of corruption A specific class of corruption: Harassment bribery A specific policy instrument: Asymmetric punishment Endogenous detection probabilities (whistle blowing) Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 2 / 7
  6. 6. A simple model of corruption A specific class of corruption: Harassment bribery A specific policy instrument: Asymmetric punishment Endogenous detection probabilities (whistle blowing) Q: Is legalizing bribe giving a workable policy instrument? Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 2 / 7
  7. 7. A simple model of corruption A specific class of corruption: Harassment bribery A specific policy instrument: Asymmetric punishment Endogenous detection probabilities (whistle blowing) Q: Is legalizing bribe giving a workable policy instrument? A: It depends... Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 2 / 7
  8. 8. A simple model of corruption A specific class of corruption: Harassment bribery A specific policy instrument: Asymmetric punishment Endogenous detection probabilities (whistle blowing) Q: Is legalizing bribe giving a workable policy instrument? A: It depends... on the size of the fine Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 2 / 7
  9. 9. A simple model of corruption A specific class of corruption: Harassment bribery A specific policy instrument: Asymmetric punishment Endogenous detection probabilities (whistle blowing) Q: Is legalizing bribe giving a workable policy instrument? A: It depends... on the size of the fine on the cost and effectiveness of whistle blowing Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 2 / 7
  10. 10. A simple model of corruption A specific class of corruption: Harassment bribery A specific policy instrument: Asymmetric punishment Endogenous detection probabilities (whistle blowing) Q: Is legalizing bribe giving a workable policy instrument? A: It depends... on the size of the fine on the cost and effectiveness of whistle blowing Interesting: Bribes may increase in response to higher detection probability or more asymmetry. Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 2 / 7
  11. 11. When is cooperative bargaining the relevant concept? Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 3 / 7
  12. 12. When is cooperative bargaining the relevant concept? Implications of NB solution: implements the efficient solution surplus shared equally Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 3 / 7
  13. 13. When is cooperative bargaining the relevant concept? Implications of NB solution: implements the efficient solution surplus shared equally Some results emerge because of this modeling choice: bribe size increasing in asymmetry Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 3 / 7
  14. 14. When is cooperative bargaining the relevant concept? Implications of NB solution: implements the efficient solution surplus shared equally Some results emerge because of this modeling choice: bribe size increasing in asymmetry Makes welfare analysis hard outcome can’t be rejected on efficiency grounds (Why is corruption bad?) Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 3 / 7
  15. 15. When is cooperative bargaining the relevant concept? Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 4 / 7
  16. 16. When is cooperative bargaining the relevant concept? Low value cases (e.g. passports, doctor’s visits) equal bargaining power unlikely extortion seems more relevant (and there’s a literature) Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 4 / 7
  17. 17. When is cooperative bargaining the relevant concept? Low value cases (e.g. passports, doctor’s visits) equal bargaining power unlikely extortion seems more relevant (and there’s a literature) → NB probably not so relevant Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 4 / 7
  18. 18. When is cooperative bargaining the relevant concept? Low value cases (e.g. passports, doctor’s visits) equal bargaining power unlikely extortion seems more relevant (and there’s a literature) → NB probably not so relevant High value cases (e.g. building licenses/assessment of quality) longer term relationships, higher stakes, probably competition Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 4 / 7
  19. 19. When is cooperative bargaining the relevant concept? Low value cases (e.g. passports, doctor’s visits) equal bargaining power unlikely extortion seems more relevant (and there’s a literature) → NB probably not so relevant High value cases (e.g. building licenses/assessment of quality) longer term relationships, higher stakes, probably competition → NB more relevant Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 4 / 7
  20. 20. High value cases - Does the model fit reality? Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 5 / 7
  21. 21. High value cases - Does the model fit reality? Contract enforcable? delay between bribe and delivery, hold-up no legal protection obv, so needs to be self-enforcing, trust Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 5 / 7
  22. 22. High value cases - Does the model fit reality? Contract enforcable? delay between bribe and delivery, hold-up no legal protection obv, so needs to be self-enforcing, trust Suggestion 1: Consider a dynamic game Are contracts self-enforcing? Repeated interaction: Retaliation, Reputation Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 5 / 7
  23. 23. High value cases - Does the model fit reality? Contract enforcable? delay between bribe and delivery, hold-up no legal protection obv, so needs to be self-enforcing, trust Suggestion 1: Consider a dynamic game Are contracts self-enforcing? Repeated interaction: Retaliation, Reputation Suggestion 2: Consider very severe punishment (e.g. job loss) and rewards for whistle blowing Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 5 / 7
  24. 24. Which Policy Lessons to Draw? Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 6 / 7
  25. 25. Which Policy Lessons to Draw? Non-monotone outcome: Asymmetry may increase the bribe size and fail to eliminate bribery when the cost of blowing the whistle is high and the effectiveness relatively low. So it’s important to pick the policy just right, depending on parameters Pick a schedule of fines and effort levels for detection for different values of corrupt transactions Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 6 / 7
  26. 26. Which Policy Lessons to Draw? Non-monotone outcome: Asymmetry may increase the bribe size and fail to eliminate bribery when the cost of blowing the whistle is high and the effectiveness relatively low. So it’s important to pick the policy just right, depending on parameters Pick a schedule of fines and effort levels for detection for different values of corrupt transactions What if these parameters aren’t characteristics of the environment, but rather the individuals that meet? Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 6 / 7
  27. 27. Which Policy Lessons to Draw? Non-monotone outcome: Asymmetry may increase the bribe size and fail to eliminate bribery when the cost of blowing the whistle is high and the effectiveness relatively low. So it’s important to pick the policy just right, depending on parameters Pick a schedule of fines and effort levels for detection for different values of corrupt transactions What if these parameters aren’t characteristics of the environment, but rather the individuals that meet? → Then we design a policy that works for some part of the distribution, but not others. Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 6 / 7
  28. 28. Which Policy Lessons to Draw? Non-monotone outcome: Asymmetry may increase the bribe size and fail to eliminate bribery when the cost of blowing the whistle is high and the effectiveness relatively low. So it’s important to pick the policy just right, depending on parameters Pick a schedule of fines and effort levels for detection for different values of corrupt transactions What if these parameters aren’t characteristics of the environment, but rather the individuals that meet? → Then we design a policy that works for some part of the distribution, but not others. → In particular: Imagine poorer people cannot achieve the same effectiveness when reporting bribery. Then the same policy that eliminates bribes among the richer makes the poorer worse off (have to pay even higher bribes) Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 6 / 7
  29. 29. Thank you! Jenny Simon (SITE) Discusion: Asymmetric Punishment August 31, 2015 7 / 7

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