Cooperation, Bribery, and the Rule of Law

Corruption reduces societies' welfare as it undermines incentives for civic behavior. However, less is known about the conditions that amplify or protect from negative consequences of corruption. This study investigates in an experiment how the effect of corruption on civic cooperation is mediated by the rule of law, i.e., whether punishment rules are just or not. Our basic setup is a repeated public goods game where citizens can contribute and an official can punish. We vary, first, whether citizens can bribe the official or not, and second, whether excessive punishment of high contributors is precluded (strong rule of law) or not (weak rule of law). We find that the possibility of bribery deteriorates cooperation only under a weak rule of law. This negative externality is avoided when a strong rule of law protects high contributors from harassment bribery, even if citizen-driven (collusive) bribery persists. Our findings show how justice institutions that limit officials´ power can protect from the societal costs of corruption.