TY - JOUR AU - Bertrand,Marianne AU - Djankov,Simeon AU - Hanna,Rema AU - Mullainathan,Sendhil TI - Does Corruption Produce Unsafe Drivers? JF - National Bureau of Economic Research Working Paper Series VL - No. 12274 PY - 2006 Y2 - June 2006 UR - http://www.nber.org/papers/w12274 L1 - http://www.nber.org/papers/w12274.pdf N1 - Author contact info: Marianne Bertrand Booth School of Business University of Chicago 5807 South Woodlawn Avenue Chicago, IL 60637 Tel: 773/834-5943 Fax: 773/702-0458 E-Mail: marianne.bertrand@chicagobooth.edu Simeon Djankov min E-Mail: sdjankov@minfin.bg Rema Hanna Kennedy School of Government Harvard University 79 JFK Street Cambridge, MA 02138 Tel: 617/496-1140 Fax: 617/496-5747 E-Mail: rema_hanna@ksg.harvard.edu Sendhil Mullainathan Department of Economics Littauer M-18 Harvard University Cambridge, MA 02138 Tel: 617/496-2720 Fax: 617/495-7730 E-Mail: mullain@fas.harvard.edu M2 - featured in NBER digest on 2006-06-05 AB - We follow 822 applicants through the process of obtaining a driver%u2019s license in New Delhi, India. To understand how the bureaucracy responds to individual and social needs, participants were randomly assigned to one of three groups: bonus, lesson, and comparison groups. Participants in the bonus group were offered a financial reward if they could obtain their license fast; participants in the lesson group were offered free driving lessons. To gauge driving skills, we performed a surprise driving test after participants had obtained their licenses. Several interesting facts regarding corruption emerge. First, the bureaucracy responds to individual needs. Those who want their license faster (e.g. the bonus group), get it 40% faster and at a 20% higher rate. Second, the bureaucracy is insensitive to social needs. The bonus group does not learn to drive safely in order to obtain their license: in fact, 69% of them were rated as %u201Cfailures%u201D on the independent driving test. Those in the lesson group, despite superior driving skills, are only slightly more likely to obtain a license than the comparison group and far less likely (by 29 percentage points) than the bonus group. Detailed surveys allow us to document the mechanisms of corruption. We find that bureaucrats arbitrarily fail drivers at a high rate during the driving exam, irrespective of their ability to drive. To overcome this, individuals pay informal %u201Cagents%u201D to bribe the bureaucrat and avoid taking the exam altogether. An audit study of agents further highlights the insensitivity of agents%u2019 pricing to driving skills. Together, these results suggest that bureaucrats raise red tape to extract bribes and that this corruption undermines the very purpose of regulation. ER -