Corruption, norm enforcement and cooperation

Abstract

In many societies, the power to punish is granted to a centralized authority. While the punishment of free-riders has been shown to play an important role in the provision of public goods, corruption might strongly disrupt the ability of a centralized authority to foster cooperation. In this paper, we show that cooperation is reduced by 30% if the punishment authority can be bribed. Two concurrent channels lead to this result. First, low contributors use bribery as a way to tame the punishment authority. The punishment authority tends to reciprocate these bribes by assigning fewer punishment points. These low levels of punishment do not suffice to discipline the free-riders, who never raise their contributions. Second, bribery has negative spillovers on high contributors, who get discouraged and gradually decrease their contributions down to the level of low contributors. Overall, our paper highlights a potential peril of centralization: the sensitivity of the punishment authority to bribery.