An Empirical Study of Corruption in Ports

We generate an original dataset on bribe payments at two competing ports in Southern Africa that allows us to take an unusually close look at the relationship between bureaucratic organization, bribe-setting behavior and the costs corruption imposes on users of public services. We find that the way bureaucracies are organized can generate different opportunities for bureaucrats to engage in "collusive" or "coercive" types of corruption. We then observe how firms adjust their shipping and sourcing strategies in response to different types of corruption. "Collusive" corruption is cost-reducing for firms, increasing usage of the corrupt port, while "coercive" corruption is cost-increasing, reducing demand for port services. Our findings therefore suggest that firms respond to the opportunities and challenges created by different types of corruption, organizing production in a way that increases or decreases demand for the public service.