Bribes vs. Taxes: Market Structure and Incentives

Journal Article
Published on 20 October 2021

The open access version of this article is available here at the Journal of Comparative Economics


Firms in low-income countries often avoid paying taxes by making informal payments to tax officials. To decrease these payments, we design an incentive scheme for business tax inspectors that rewards them according to the anonymous evaluation submitted by inspected firms. We show theoretically that incentives decrease the bribe amount, but make firms facing a more inelastic demand more attractive for inspectors. Attaching higher weights to the evaluation of smaller firms limits the scope for targeting. We evaluate both schemes in a field experiment in the Kyrgyz Republic. Our intervention reduces average business costs and prices, and increases tax revenues.


Francesco Amodio

McGill University

Jieun Choi

World Bank

Giacomo De Giorgi

University of Geneva

Aminur Rahman

World Bank