Tim Harford, Daily Policy Digest
July 24, 2006
Maybe, but incentives may trump lack of personal morals, according to Tim Harford, the author of Undercover Economist: Exposing Why the Rich Are Rich, the Poor Are Poor – and Why You Can Never Buy a Decent Used Car!

Citing the mainstream economic viewpoint that correlates red tape and
leniency with corruption, i.e., the harder it is to make money
legally, the more tempting it is to do so illegally; and if people are
not punished for stealing, then they will be more likely to steal –
Harford introduces the findings of a new study [PDF] that attempts to gauge whether some cultures are more prone to graft than others.

In order to do this, the study’s authors, economists Ray Fisman and Edward Miguel, sought a real-life laboratory which would
allow them to study people across culture relatively free from legal restraint, to see who cheated and who was honest.

The perfect guinea pigs were soon located in the form of diplomats in New York city, where diplomatic immunity meant that
diplomats who received parking tickets were not beholden to pay them, making parking legally a matter of personal ethics.

Fisman and Miguel’s findings initially support the view that “poor countries are poor because they are full of corrupt people.”

Chad and Bangladesh, countries that consistently rank high on global
graft watchdog Transparency International’s corruption index,
produced more than 2,500 violations between them during Fisman and
Miguel’s testing period from 1997 to 2005. Over the same
period, “the famously incorruptible Scandinavians committed only 12
unpaid parking violations, and most of them were by a single
criminal mastermind from Finland,” reports Harford.

However, after the 2002 Clinton-Schumer Amendment gave New York city
“much greater power to punish diplomatic parking violations: cars were
towed, permits suspended, and fines collected from the relevant
foreign-aid budget.”

Unpaid violations immediately fell 90 percent.

Fisman and Miguel may want to compare enforcement incentives on corruption outcomes across culture next.