Incentives versus Bribery

• Author: Fabian Teichmann
• Position: Attorney-at-Law and Public Notary, Teichmann International (Schweiz) AG
• Pages: 12-15

12

Vol. 3 No. 3

January, 2018

Balkan Journal of Interdisciplinary Research

IIPCCL Publishing, Graz-Austria

ISSN 2410-759X

Acces online at www.iipccl.org

Incentives versus Bribery

Dr. Dr. Fabian Teichmann

Aorney-at-Law and Public Notary

Teichmann International (Schweiz) AG

Abstract

This article reviews the existing literature on incentives and bribery. Particular aention is paid

to goal seing, performance management and the characteristics of (monetary) incentives. A

signicant research gap is identied and suggestions for further research are outlined.

Keywords: Bribery, Corruption, Compliance, Incentives.

Incentives versus Bribery

Corruption continues to pose a signicant obstacle to multinational corporations

in Eastern Europe. One way of combaing corruption would be to implement

anti-bribery incentives. It is clear, regarding the relationship between bribery and

incentives in multinational corporations, that, while it has been investigated with

respect to the public sector, more research needs to be done concerning the private

sector. Furthermore, the existing literature seems to focus on providing incentives for

the parties receiving bribes. Addressing this research gap, the present article focuses

on multinational corporations, and, therein, on the party potentially paying the bribe.

In the past, it has been investigated whether the level of openness to bribery of tax

collectors could be increased through incentive systems (Besley & McLaren, 1993: 137;

Mookherjee, 1998: 103). In other research, it has been analyzed whether graders in

Burkina Faso were more or less likely to accept bribes under bonus or malus systems

(Armantier & Boly, 2014: 13). However, the overwhelming majority of the literature

on wages and bribery in the public sector has focused on adequate wages in general

rather than on incentives (Goel & Rich., 1989: 269 f.; Di Tella & Schargrodsky, 2003:

269 f.; Becker & Stigler, 1974: 6; Van Rckeghem & Weder, 2001: 307).

It has been argued in prior research that alternative payment schemes for tax

inspectors might be useful in a corrupt environment (Besley & McLaren, 1993: 119

f.). In the study, both the problems of adverse selection and moral hazard were

investigated, and three wage regimes were identied. Under the rst, tax inspectors

were simply paid their reservation wage, which was equivalent to the salary they

could have earned elsewhere. In the second model, a wage that deters bribery would

be paid, while, in the third, a wage inferior to the reservation wage would be paid.

In the laer scenario, only the dishonest would be expected to become tax inspectors

(Besley & McLaren, 1993: 119). In conclusion, the study found that eciency wages

are only preferable if there is an evenly distributed tax burden and strong monitoring

as well as a corrupt pool of potential tax collectors (Besley & McLaren, 1993: 137).

However, the model developed by Besley and McLaren (1993) is rather limited in its

potential application to the phenomenon of bribery in multinational corporations.