TY  - JOUR
AU  - Olken,Benjamin A.
AU  - Barron,Patrick
TI  - The Simple Economics of Extortion: Evidence from Trucking in Aceh
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13145
PY  - 2007
Y2  - June 2007
UR  - http://www.nber.org/papers/w13145
L1  - http://www.nber.org/papers/w13145.pdf
N1  - Author contact info:
Benjamin A. Olken
Department of Economics
MIT
50 Memorial Drive
Cambridge, MA  02142-1347
Tel: 617/588-1437
Fax: 617/868-2742
E-Mail: bolken@mit.edu

Patrick Barron
World Bank Office Jakarta
Gedung BEJ Tower 2 Lt 12
Jl. Sudirman Kav 52-53, Jakarta 12190
INDONESIA
E-Mail: pbarron@worldbank.org
AB  - This paper tests whether the behavior of corrupt officials is consistent with standard industrial organization theory. We designed a study in which surveyors accompanied truck drivers on 304 trips along their regular routes in two Indonesian provinces, during which we directly observed over 6,000 illegal payments to traffic police, military officers, and attendants at weigh stations. Using plausibly exogenous changes in the number of police and military checkpoints, we show that market structure affects the level of illegal payments, finding evidence consistent with double-marginalization and hold-up along a chain of vertical monopolies. Furthermore, we document that the illegal nature of these payments does not prevent corrupt officials from extracting additional revenue using complex pricing schemes, including third-degree price discrimination and a menu of two-part tariffs. Our findings illustrate the importance of considering the market structure for bribes when designing anti-corruption policy.
ER  -