Many commentators in the developed countries insist that bribery is a form of corruption and needs to be stamped out in developing countries, contending that it is bad for the people.

The main argument is that increases the gap between the rich and the poor.

Does bribery have more negative effects on a developing nation than positive effects, if any?

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    Not a real question, but an attempt to start a discussion, which is inappropriate in this forum. – user3344 Jun 28 '11 at 23:19
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    I can answer this, but I have other things to tend to. It may be that a sudden, inexplicable increase in my reputation would change my priorities... – Adam Davis Jun 28 '11 at 23:20
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    @Adam - Here is a promissory note for 10x sock puppet votes once the answer is forth coming. – going Jun 28 '11 at 23:47
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    Of course it has negative effects. What a question. Instead of upholding the law, police see through fingers with crime because they are bribed. Good or bad for society? Instead of giving the goverment contract to the best offer, it goes to somebodies incompetent nephew. Good or bad for society? Geez. – Lennart Regebro Jun 29 '11 at 9:04
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    @xiaohouzi79: "My country" is badly defined. In Poland there is a lot of this going on, yes. In Sweden, where I came from originally, contracts do not go to incompetent nephews, no. See also: en.wikipedia.org/wiki/Corruption_Perceptions_Index – Lennart Regebro Jun 30 '11 at 3:08

Yes it does. Source: any textbook on game theory or economics.

Bribery changes the payoff of the game.

Here's a simple model.

Say an official needs to decide 1000 things. In 100 of them the payoff function is skewed by things like currying political favor/nepotism.

The payoff function for the other 900 is "How will those decisions affect my job performance". Imperfectly, the job performance somewhat correlates with how good those decisions were. E.g. if you're in charge of building a factory, your decisions affect how cheap and fast it is built. Your bosses would reward you (presumably, all other things being equal) for faster/cheaper result. So you will make decisions which achieve that result, thus enhancing productivity. This is good for your country.

Now, say you HAVE bribery. On 600 of those 900 decisions, your payoff function suddenly becomes different - if the amount of bribe exceeds the extra benefits to you from doing the job well on that decision, you will make a less productive decision to get the bribe.

This decreases productivity.

An additional problem is that bribery imposes extra costs (and thus hampers economic output), especially on smaller firms.

Source: http://rru.worldbank.org/documents/publicpolicyjournal/074ackerm.pdf

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    This seems to assume bribery is instigated by a mysterious outside force with money that they printed in their own yard. Remember that bribes come from somewhere, for some purpose. Although illegitimate, bribery is still a form of trade. Obviously the briber is trying to effect an advantageous decision from the bribee (advantageous to the briber), but this is the same (in essence) as the boss in this example. The boss wants the worker to do a good job so incentivizes him/her with potential raise, the briber wants the worker to do X to uses a bribe instead. I am curious what effects this has. – Razor Storm Jun 29 '11 at 23:54
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    Basically my point is: is it proven that listening to your boss is better for society than listening to your average briber? Of course bribers aren't very altruistic, but neither are peoples bosses. Both are driven by capitalistic goals, whether they are going through legally sanctioned means or not shouldn't play a part should it? (I'm not attacking your answer, just being skeptical. After all this is skeptics exchange ;) ) – Razor Storm Jun 29 '11 at 23:58
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    @Razor - simple. With some rare exceptions of an enlightened briber and really incompetent/evil boss, if what the briber wanted the outcome to be would be beneficial, the boss would want the same and the bribe would not be needed. – user5341 Jun 30 '11 at 1:29
  • Ok cool, make sense :) – Razor Storm Jun 30 '11 at 18:08
  • Cool source, though it would be nice to see how what you gathered from the source actually informs your answer (quotes, or inline references?) – Nicole Jul 11 '11 at 22:45

In a paper by Jennifer Hunt and Sonia Laszlo, from McGill University, Bribery: Who Pays, Who Refuses, What Are The Payoffs?, the authors cite work of Shleifer and Vishny that

...suggest[s] that bribery of public officials has economic effects that can prove more distortionary than taxation.

In their study's introduction, the authors continue to cite supporting evidence of bribery being detrimental to a country's development:

Mauro (1995) finds cross–country evidence that corruption reduces economic growth. Moreover, many development economists fear that corruption reduces equity as well as efficiency, constituting a regressive tax, causing the poor to be excluded from public services, and skewing growth in favor of the rich.

For their case study of Peru, the authors conclude that

Compared with a client dealing with an official acting scrupulously, a client who pays a bribe reluctantly has a slightly lower probability of concluding her business with the official, a client who pays a bribe voluntarily has a similar probability, while a client who refuses to bribe has a much lower probability (by 16 percentage points)

therefore, bribery actually delays resolution of official matters instead of facilitating it, with a significant impact on those who refuse to pay or cannot afford it.

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    What does “more distortionary than taxation” mean? This seems like a very odd comparison to make, unless the agenda was to make taxes look bad. – Konrad Rudolph Jul 5 '11 at 9:09

While I like DVK's answer, let's add another one that is I hope simpler.

An official has to decide which contractor to use to build a bridge. In the absence of bribery they will choose the bid that gets the best value, to the best of their ability. All well and good. With bribery in the picture the contract will go to a contractor with a higher price, or lower quality, costing the bridge builder (usually a government) more money. The actual amount of the bribe is usually trivial compared with the cost of the bridge, and doesn't figure in the calculation - it's the increased cost that causes the problem.

With other kinds of bribes there are bigger problems. Let's say the bridge builder uses substandard concrete and bribes the quality inspector not to notice. Now you have a faulty bridge and the cost of replacing it when it collapses (plus some dead people if it collapses at the wrong time). Or your police official is bribed to not arrest a crime lord. Crime usually costs someone money, so society is again worse off by quite a lot.

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    That's fine if it happens. It seemed to me like the questioner was looking for an explanation rather than a scientific analysis. – DJClayworth Jun 29 '11 at 1:23
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    @DVK: Then we should kick the downvoters' butts. :) This is an obvious issue. It's like asking if 5-3 really is less than 5. :-) – Lennart Regebro Jun 29 '11 at 9:06
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    @Lennart - I have seen many "5-3<5" answers with no references get downvoted, both mine and others. Sklivvz's template is very explicit about "no original research" :( – user5341 Jun 29 '11 at 11:05
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    I just upvoted. References? Stop this nonsense when it's absolutely not needed. – Jürgen A. Erhard Jun 29 '11 at 17:47
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    @DVK: no it should be downvoted because it's pointless. The question to be answered is: "Is the damage to society proven by facts?" and not "Can you imagine a way in which bribery could damage society?" – Sklivvz Jun 29 '11 at 22:35

This type of "questions" can mostly be answered looking at the worst-case scenario. Thats what actually surprises me. After nuclear disaster in Japan and state bankrupt of Greece one should already know before finishing the formulation of the question, in which contexts bribery can not only damage, but ruin whole societies.

In Japan one may say, it was technological mismanagment, but according to this source

Dr Shoji Sawada is a theoretical particle physicist and Professor Emeritus at Nagoya University in Japan. He is concerned about the types of nuclear plants in his country, and the fact that most of them are of US design.

"Most of the reactors in Japan were designed by US companies who did not care for the effects of earthquakes," Dr Sawada told Al Jazeera. "I think this problem applies to all nuclear power stations across Japan."

Using nuclear power to produce electricity in Japan is a product of the nuclear policy of the US, something Dr Sawada feels is also a large component of the problem.

"Most of the Japanese scientists at that time, the mid-1950s, considered that the technology of nuclear energy was under development or not established enough, and that it was too early to be put to practical use," he explained. "The Japan Scientists Council recommended the Japanese government not use this technology yet, but the government accepted to use enriched uranium to fuel nuclear power stations, and was thus subjected to US government policy."

one has to ask, if japan scientists were just overruled or the wrong scientists/politicians, giving legitimation to nuclear power plants (not optimized towards Japan unique environmental risks), were bribed. Same with security inspectors for local plants...

Economy of Greece:

The country suffers from high levels of political and economic corruption and low global competitiveness compared to its EU partners.

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    While bad things have resulted from bribes, I don't think this answer is helpful because it doesn't show that even better things haven't happened as a result of bribes. For example, what if bribes led to modern medicine? I don't think the worst case scenario analysis presented here answers the question asked..."Does bribery have more negative effects on a developing nation than positive effects, if any?" – Dustin Wyatt Jul 4 '11 at 22:49

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