Competition and corruption: Highway corruption in West Africa

Abstract

Petty corruption in the developing world impedes citizens from receiving public services and operating their businesses. In this paper, we show the importance of market structure in determining a corruption equilibrium. We do this in the context of highway merchandise transportation in West Africa, where checkpoint officials frequently stop truck drivers for petty bribes. We exploit a road system with two alternative corridors to develop a model which predicts that checkpoints in the two competing corridors follow a Bertrand game as they set price equal to the marginal cost. Moreover, when costs to pass through one corridor increase due to road construction, checkpoints in the other corridor raise prices and keep drivers waiting for longer. We estimate a difference-in-differences model to confirm that road construction did increase both bribes and enforced delays for stops in the unaffected corridor. This work demonstrates the importance of competition among corrupted officials to facilitate public services for drivers and suggests that the effectiveness of a local intervention can be offset by reallocating customers towards officials who are not affected by it.