# 1 Introduction

Corruption is a major concern in several countries. One reason it is diffi cult to control is that those involved have an incentive to collude to prevent detection. While this is a feature of many criminal activities, the problem under corruption is heightened by criminal codes that, in most countries, penalize the bribe-giver and the bribe-taker equally.<sup>1</sup> As a result, all participants in a bribing scheme, including those who might otherwise be considered victims and could be tempted to act as whistle-blowers, have a vested interest against doing so.

How could such collusion be weakened and bribery reduced? A possible solution that we discuss in this paper lies in asymmetric punishments. The basic justification for asymmetric punishments is that, by penalizing some parties less than others, the government can create ex-post incentives for agents to report the crime and thereby stop colluding.

The idea of asymmetric punishment for crime is not new and it has been implemented in various forms around the world. For example, prosecutors in the United States sometimes offer immunity to those who reveal financial crimes that they might themselves have been complicit in. In Italy, similar schemes have been used to fight organized crime.

If asymmetric punishment is quite widespread in the case of financial and organized crime, it is relatively rare in the case of bribery.<sup>2</sup> This is somewhat surprising, especially in the context of harassment bribes where (i) citizens are asked to pay a bureaucrat to receive services that they are legally entitled to, and (ii) the bribe does not itself change the nature of the services being exchanged.<sup>3</sup> Harassment bribes are pervasive in developing countries (and sometimes beyond) and directly affect large segments of populations.<sup>4</sup> This means that there might be significant political returns to tackling such corruption with innovative solutions. In a note for India’s Ministry of Finance, one of us (Basu, 2011) proposed the following: decriminalize the giving (but not taking) of harassment bribes and require the bribe-taker to return the bribe to the citizen if caught.<sup>5</sup> This would create ex-post incentives for citizens to reveal that bribes were paid, and could end up discouraging bureaucrats from demanding bribes in the first place.

Inspired by the animated discussion that followed this proposal,<sup>6</sup> and to

> 1 See Linklaters (2012) for a survey.

> 2 There are some exceptions, discussed in Li (2012) and Engel et al (2012).

> 3 As would be the case if, for example, an entrepreneur were paying a bribe to avoid complying with environmental standards.

> 4 While not relevant to this paper, the distinction between harassment bribes (a type of extortion) and other forms of bribery is a complex one. See, for example, Carson (1985) and Oak (2013).

> 5 According to India’s Prevention of Corruption Act (1988), the giver and the taker of a bribe are considered equally culpable and can be financially penalized and incarcerated for up to five years.

> 6 The proposal led to a large controversy with questions being raised by members of the Indian Parliament. It received wide publicity in the print and electronic media. See, for instance, The Economist (2011), Dreze (2011), Sainath (2011), Mitra (2011), Seabright (2011), Haider (2012), and Zakaria (2011).

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