The simple economics of extortion
Subtitle: evidence from trucking in Aceh
By: Benjamin A. Olken, Patrick Barron.
Contributors: Barron, Patrick, 1977-; National Bureau of Economic Research.
Series: NBER working paper series -- no. 13145.; Working paper series (National Bureau of Economic Research) -- working paper no. 13145.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 57
Subjects: Local government -- Corrupt practices -- Nanggroe Aceh Darussalam (Indonesia) -- Mathematical models; Local government -- Corrupt practices -- Indonesia -- Aceh -- Mathematical models; Bribery -- Economic aspects -- Nanggroe Aceh Darussalam (Indonesia); Bribery -- Economic aspects -- Indonesia -- Aceh; Nanggroe Aceh Darussalam (Indonesia) -- Politics and government -- Economic policy; Aceh (Indonesia) -- Politics and government -- Economic policy
Description: "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."--abstract.
Notes: "June 2007"

Includes bibliographical references (p. 43-44).

Also available in PDF from the NBER world wide web site (www.nber.org).