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Driving in New Delhi

Alex Tabarrok writes:

Marginal Revolution: Corruption: Joel Waldfogel covers an interesting new study of corruption in the motor vehicle department in India. Some eight hundred Indians were randomly assigned to one of three groups: the first group got a cash bonus for getting a license, the second group was given driving lessons, the third group was a control.... [T]he first group bribed their way to a license. In addition to taking the shortest period of time, most of the first group never even had to take a test!

Waldfogel has more details. He misses, however, what I think is the most important finding of the study. The delay in the Indian DMV is "endogeneous," i.e. it's not due to torpor or constraint but instead is a result of corruption. How can the Indian bureaucrats make the most of their control over licenses? First, make the line long. But that can increase the bribe-price only so much - especially given how cheap it is to hire someone in India to wait in line for you. The real value is in the license itself so the Indian examiners randomly fail many applicants, even those with good driving skills. Paying the bribe, therefore, is really the only route to a license. The net result is long lines and unsafe drivers.

Corruption like this is endemic throughout the world. Libertarians should take note, however, the problem in this case is not so much that there is too much government but that government is too weak.

Does Corruption Produce Unsafe Drivers?: Marianne Bertrand, Simeon Djankov, Rema Hanna, Sendhil Mullainathan: We follow 822 applicants through the process of obtaining a driver's license in New Delhi, India. To understand how the bureaucracy responds to individual and social needs, participants were randomly assigned to one of three groups: bonus, lesson, and comparison groups. Participants in the bonus group were offered a financial reward if they could obtain their license fast; participants in the lesson group were offered free driving lessons. To gauge driving skills, we performed a surprise driving test after participants had obtained their licenses. Several interesting facts regarding corruption emerge. First, the bureaucracy responds to individual needs. Those who want their license faster (e.g. the bonus group), get it 40% faster and at a 20% higher rate. Second, the bureaucracy is insensitive to social needs. The bonus group does not learn to drive safely in order to obtain their license: in fact, 69% of them were rated as "failures" on the independent driving test. Those in the lesson group, despite superior driving skills, are only slightly more likely to obtain a license than the comparison group and far less likely (by 29 percentage points) than the bonus group. Detailed surveys allow us to document the mechanisms of corruption. We find that bureaucrats arbitrarily fail drivers at a high rate during the driving exam, irrespective of their ability to drive. To overcome this, individuals pay informal "agents" to bribe the bureaucrat and avoid taking the exam altogether. An audit study of agents further highlights the insensitivity of agents' pricing to driving skills. Together, these results suggest that bureaucrats raise red tape to extract bribes and that this corruption undermines the very purpose of regulation.

Three points:

  • This shows a high degree of collective action on the part of corrupt bureaucrats--one that one would (incorrectly) think would not survive even cursory scrutiny by the state.
  • The problem is not that the state is too strong: the state is totally unable to control its own functionaries. A state that cannot control its own functionaries is by definition weak.
  • The problem is that the state is weak in the wrong places and strong in the wrong places: weak in its control of its own functionaries (where it should be strong) and strong in its control of and ability to hassle the public in order to extort money (where it should be weak).