Incentives matter: parking ticket file

From Tim Harford's review of "Economic Gangsters: Corruption, Violence, and the Poverty of Nations", by Raymond Fisman and Edward Miguel at reasononline

The United Nations in Manhattan kindly provided guinea pigs for just such an experiment. Diplomatic immunity meant that parking tickets issued to diplomats could not be enforced. The decision to park legally or not, therefore, was a matter of each person’s conscience.

Fisman and Miguel found that countries with endemic corruption at home, as measured by the anti-corruption organization Transparency International, were represented by habitual illegal parkers. Chad and Bangladesh, so often near the top of “perceptions of corruption” rankings, produced more than 2,500 violations between them from 1997 to 2005. Squeaky clean Scandinavians, on the other hand, committed only 12 unpaid parking violations, and most of those involved a single criminal mastermind from Finland. On the face of it, this evidence supports the view that poor countries are corrupt because they’re full of corrupt people.

Yet incentives clearly matter, too. In 2002, after decades of playing cat and mouse with the United Nations, New York City won much greater power to punish deadbeat diplomats. [...] The city began to tow cars and the State Department deducted fines from the relevant foreign aid budgets. Almost overnight, unpaid violations fell dramatically.