assess its “robustness”, in this paper we study how different punishment schemes are likely to affect the size and incidence of harassment bribes. This allows us to shed some new light on the conditions under which asymmetric punishment is able to deter bribe-giving effectively.

We develop a simple model in which a bureaucrat can costlessly provide a service that creates a surplus for the citizen, but might demand a bribe in exchange. If a bribe is demanded, the bureaucrat and the citizen split the surplus through a process of Nash bargaining.

We first analyze a benchmark case where the fines for bribe-giving and bribetaking and the probability of detection are exogenous. In such a setting, a bribe is exchanged as long as the total expected penalty is small enough. Interestingly, the symmetry properties of the punishments are irrelevant to the incidence of bribery. Whether the penalty burden falls disproportionately on the bureaucrat or the citizen, and whether the bureaucrat is required to repay part of the bribe, do not matter: the bribe size will adjust to keep the surplus equally split.

Furthermore, we show that bribe sizes could rise when anti-corruption enforcement is strengthened. Intuitively, if penalties are at all asymmetric, as enforcement improves the citizen must pay a larger bribe to compensate the bureaucrat for his relatively larger expected penalty. This means that if bribery is measured by bribe size, an attempt to reduce bribery might instead increase it.

Next, we relax the assumption that the probability of detection is exogenous, and we assume that it depends on costly actions undertaken by the state and/or the citizen. We show that asymmetric punishment increases the incentives for the citizen to whistle-blow. However, whether this leads to the elimination of bribery, as in Basu (2011), or to an exacerbation of the problem—in which bribery persists and the bribe size rises to account for the greater probability of detection—depends on the effectiveness of law enforcement agencies in detecting corruption. Asymmetric punishments could also give rise to multiple equilibria with two possible outcomes—one where the bribe size is small and the probability of detection is also small, and another where both the bribe size and probability of detection are large.

This necessarily complicates policy prescriptions. If it is suffi ciently easy for a citizen to get the corrupt bureaucrat caught, asymmetric punishment can be an effective tool to eliminate bribery. However, in countries where the marginal cost of improved detection is high, possibly the same countries where harassment bribes are a problem in the first place, bribery will survive under asymmetric punishment. When this is the case, bribe size might rise to account for the fact that the offi cial is more likely to be penalized due to the entrepreneur’s efforts to report. Here, asymmetric punishment in fact creates an effi ciency loss through the costs associated with whistle-blowing. Our model could therefore partly explain why a country like China, which implemented asymmetric punishments in 1997 but has high costs of reporting, has not experienced a discernible reduction in corruption (Li, 2012).

Bribery and corruption have been subjects of economic inquiry for some time (see Bardhan, 1997, for a comprehensive survey). In their seminal paper, Shleifer 3