CALTECH SS 280 - Cultures of Corruption: Evidence from Diplomatic Parking Tickets

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Cultures of Corruption: Evidence from Diplomatic Parking Tickets* Ray Fisman Edward Miguel Columbia University and NBER University of California, Berkeley and NBER First version: March 2006 This version: July 2006 Abstract: Corruption is believed to be a major factor impeding economic development, but the importance of legal enforcement versus cultural norms in controlling corruption is poorly understood. To disentangle these two factors, we exploit a natural experiment, the stationing of thousands of diplomats from around the world in New York City. Diplomatic immunity means there was essentially zero legal enforcement of diplomatic parking violations, allowing us to examine the role of cultural norms alone. This generates a revealed preference measure of government officials’ corruption based on real-world behavior taking place in the same setting. We find strong persistence in corruption norms: diplomats from high corruption countries (based on existing survey-based indices) have significantly more parking violations, and these differences persist over time. In a second main result, officials from countries that survey evidence indicates have less favorable popular views of the United States commit significantly more parking violations, providing non-laboratory evidence on sentiment in economic decision-making. Taken together, factors other than legal enforcement appear to be important determinants of corruption. * We thank Seema Jayachandran, Dean Yang, Luigi Zingales, and seminar participants at the Harvard Development Economics Lunch, Harvard Behavioral Economics Seminar, Harvard JFK School of Government, Harvard Political Economy discussion group, the University of Michigan, and LSE for helpful suggestions. Adam Sacarny provided superb research assistance. We are especially grateful to the New York City Department of Finance for providing us with data on parking violations, and National Public Radio for alerting us to the existence of these data. All errors are our own. -- R. Fisman, Columbia University Graduate School of Business, Uris 823, New York, NY 10027, USA, phone: 1 (212) 854-9157, fax 1 (212) 854-9895, email: [email protected]. -- E. Miguel, Department of Economics, University of California, 549 Evans Hall #3880, Berkeley, CA 94720-3880, USA, phone: 1 (510) 642-7162, fax: 1 (510) 642-6615, email: [email protected]. Introduction The underlying causes of corruption remain poorly understood and widely debated. Yet the study of corruption beyond the realm of opinion surveys is still in its infancy, and there is little firm evidence relating corruption to real-world causal factors. Notably, social norms are often mentioned as a primary contributor to corruption in both the academic literature and the popular press, yet there is no evidence beyond the most casual of cross-country empirics.1 Research on the causes of corruption is compounded by the difficulties inherent in disentangling the effect of social norms versus legal enforcement: societies that collectively place less importance on rooting out corruption, and thus have weak anti-corruption social norms, may simultaneously have less legal enforcement. Understanding the relative importance of these potential causes of corruption is of central importance in reforming public institutions to improve governance: if corruption is predominantly controlled through anti-corruption social norms, interventions that focus exclusively on boosting legal enforcement will likely fail. We develop an empirical approach for evaluating the role of social norms in corruption by studying parking violations among international diplomats living in New York City. Consular personnel and their families benefit from diplomatic immunity, a privilege which allowed them to avoid paying parking fines prior to November 2002. We examine differences in the behavior of government employees from different countries, all living and working in the same city, all of whom can act with impunity in (illegally) parking their cars. The act of parking illegally fits well with a standard definition of corruption, i.e., “the abuse of entrusted power for private gain,”2 suggesting that the comparison of parking violations by diplomats from different societies serves as a plausible measure of the extent of corruption social norms or a corruption “culture”. 1 See Lambsdorff (2005) for an overview of findings on culture and corruption based on cross-country comparisons. Witzel (2005) provides one of many discussions on the topic in the popular press. Mauro (2004) discusses several models of multiple equilibria in corruption levels that could be seen as capturing corruption culture. Tirole (1996) develops a model of bureaucratic collective reputation that also implies persistent corruption. 2 This is the definition used by the international anti-corruption organization Transparency International (see http://ww1.transparency.org/about_ti/mission.html, accessed online March 9, 2006).2This setting has a number of advantages. Most importantly, our approach avoids the problem of differential legal enforcement levels across countries, and more generally strips out enforcement effects, since there was essentially no enforcement of parking violations for diplomats during the main study period. We thus interpret diplomats’ behavior as reflecting their underlying propensity to break rules for private gain when enforcement is not a consideration. Additionally, because U.N. diplomats are largely co-located in Midtown Manhattan, we avoid many concerns of unobserved differences in parking availability across geographic settings. The first contribution of this approach lies in allowing us to construct a “revealed preference” measure of corruption for government officials across 146 countries. This objective measure, based on real rule-breaking in parking, is arguably an improvement over existing country corruption indices that are typically based on subjective surveys, and it is certainly much cheaper data to collect.3 Other existing corruption measures are also difficult to interpret – what does moving from a score of “1” to a score of “2” on a cross-country index really mean? – while our parking violations measure has a much more precise definition and explicitly cardinal interpretation. In our main empirical result, we find that this parking violation corruption measure is strongly positively correlated with other


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CALTECH SS 280 - Cultures of Corruption: Evidence from Diplomatic Parking Tickets

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