Corruption, Incentives, and Deterrence in Common Pool Resources Scenarios: An Experimental Approach

I study corruption as a coordination game and how social costs and collective risk influence individual corruptibility. Corruption is a fundamental issue in developing countries, with the World Bank identifying it as the primary obstacle to economic and social development. The first chapter of my dissertation investigates the various economic theories, such as principal-agent models, that have been employed to analyze corruption. I also discuss an alternative view, framing systemic corruption as a 'collective action problem.' This perspective suggests that corruption is akin to a social trap, where individuals are motivated by the expected strategies of others in society. Unlike incentive-based solutions, addressing corruption as a collective action problem requires destabilizing the corrupt equilibrium for effective anti-corruption policies. My dissertation introduces a novel approach by investigating corruption as a common resource dilemma, emphasizing horizontal interdependencies among individuals engaged in corrupt acts.
The second chapter examines a theoretical model and a novel experiment design inspired by coordination games and voluntary contribution mechanisms to study corruption in the lab. In my experiment, public officials, instead of accepting bribes, engage in petty corruption by stealing from a common pool, leading to a higher payoff but with the risk of being caught. The presence of an auditor tasked with uncovering corrupt officials introduces a risky element, and the number of corrupt officials inversely affects the probability of detection. Theoretical calculations predict two equilibria – one where no one is corrupt and another where everyone is corrupt. Changing the penalties associated with corrupt behavior, I have observed how different groups of individuals gravitate towards different equilibria in controlled laboratory settings.
The third chapter analyzes the incentives associated with current decisions that may alter both future incomes and future opportunities for corruption enrichment (Golden Goose Effect). While the chance of being caught in a specific act may be low, the chance of being caught at any point during a career is much larger and may be significant. Since the act of corruption is a gamble, I use the knowledge of the Golden Goose to design an intertemporal punishment to test if it reduces corruption over all the periods or only in the current period. I observe that there is a displacement effect of corruption from the current to the future period.
The experimental design and theoretical model are discussed, along with the analysis of results, providing insights into risk attitudes, pro-social behavior, and the dynamics of corruption over time. The study offers a comprehensive understanding of corruption, moving beyond traditional economic models and incorporating collective action perspectives for more effective policy recommendations.