DRI Working Paper No. 22
By Marianne Bertrand, University of Chicago Graduate School of Business, NBER, CEPR and IZA; Simeon Djankov, International Finance Corporation and CEPR; Rema Hanna, Graduate School of Public Service, New York University; Sendhil Mullainathan, Harvard University and NBER

Does Corruption Produce Unsafe Drivers?
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 three groups: “bonus,” “lesson” and comparison groups. In the bonus group, participants were offered a financial reward if they could obtain their license fast; in the lesson group, participants were offered free driving lessons. To gauge driving skills, we performed a surprise driving test after participants had obtained their licenses. Several findings about corruption emerge. First, the bureaucracy is responsive to individual needs. Those who want their license faster (e.g. the bonus group), get it 40% faster and at a 20% higher rate. However, the bureaucracy is insensitive to social needs. Learning to drive safely is not how those in the bonus group obtain their license: in fact, 69% of them were rated as “failures” on our independent driving test. Second, those in the lesson group, despite superior driving skills, are only slightly more likely (by 8 percentage points) to get a license than the comparison group and far less likely (by 29 percentage points) than the bonus group. Third, bureaucrats create red tape by arbitrarily failing drivers, independent of their actual driving skills. These findings reject the view that corruption is used primarily to circumvent socially unimportant parts of regulation.