Driving in New Delhi.

The search for better economic policy.
June 23 2006 7:47 AM

Driving in New Delhi

Don't complain about standing in line at the DMV.

Traffic in New Delhi. Click image to expand.
Traffic in New Delhi

At least in principle, some kinds of government corruption are not so bad because they promote efficiency in how regulations are administered. Harvard political scientist Samuel Huntington has argued that "the only thing worse than a society with a rigid, overcentralized, dishonest bureaucracy is one with a rigid, overcentralized, and honest bureaucracy." But a new study of driver's license examinations in New Delhi, India, confirms what most international policy wonks have long said: The benefits of corruption are not worth the costs.

The Department of Motor Vehicles, here and in many foreign countries, is a place of long lines, sour bureaucrats (think Patty and Selma Bouvier, Marge Simpson's chain-smoking spinster sisters), and bleak interior decorating. By the time you get to the front of the photo line, you need to shave again. Since access to government clerks is normally allocated on a first-come, first-served basis, people pay with their time rather than their money. This is inefficient: Suppose you're in a big hurry and would be willing to pay a lot to avoid waiting, while I don't mind waiting. Then you could go ahead of me, making you a lot better off and me only a little worse off, which reduces our collective frustration. One way to achieve this efficiency would be to charge a higher price for expedited service. Yet, an expedited government service option typically does not exist. So, in some countries, the offer of a bribe in exchange for quicker processing is a common form of corruption—reducing the social cost of waiting in line.

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But DMVs exist for a purpose other than provoking frustration. They're supposed to reduce unsafe driving. If I am selfish, I will take insufficient precautions: for example, hitting the road before I've learned about the brake as well as the accelerator. To correct this, governments like India's employ licensing clerks, ostensibly to screen applicants for driving ability.

Do the clerks in fact do so? To study the process of getting a driver's license in New Delhi, the authors of the new study—economists from the World Bank, the University of Chicago, New York University, and the Massachusetts Institute of Technology—recruited 822 Indians who wanted a driver's license, randomly assigning them to three groups. 

India is a good place to study corruption. On a 10-point corruption scale devised by Transparency International, where 10 is squeaky clean and 0 is completely corrupt, in 2005 India came in about 90th among 159 countries, with a score of 2.9. By comparison, Iceland was least corrupt (9.7), while Chad and Bangladesh tied (at 1.7) for most corrupt. (The United States was 17th-least corrupt, coming in between Germany and France with a score of 7.6.) 

One of the groups in the Indian study was offered a cash bonus for getting a license within 30 days. These subjects had an incentive do whatever was necessary (offer bribes) to get a license quickly. If bribes work, these applicants would get their licenses faster. A second group was given driving lessons. If the licensing process accurately screens out unprepared—and therefore more likely unsafe—drivers, then these applicants should be more likely to succeed in getting a license. Both of these applicant groups were compared to a third control group who received neither lessons nor a speedy completion bonus. The authors kept track of who got a license, as well as how much time and money the applicants spent in the process. Eventually, they gave their subjects a follow-up written exam to gauge their driving skills.

So, what happened? More than a third (37 percent) of the control group got a license, compared to 45 percent of the subjects who took driving lessons and 65 percent of the people who got paid for getting a license quickly. Subjects in the cash bonus group were most likely to hire "agents" to help them navigate the bureaucracy, spending an average of 1,280 rupees to get a license, compared with 560 rupees for those without an agent. And applicants using agents got their licenses 15 percent faster, making an average of a quarter fewer trips to the Indian DMV (which is actually called the Road Transport Office). They spent about three hours of their own time, as opposed to five hours for those who did not hire an agent.  

The agents saved applicants time by, for example, standing in line for them. But the extra cost of using an agent dwarfs the benefit of saving two hours for a typical Indian, who makes 40 rupees per hour, raising the suspicion that the agent's fee purchased something other than time. And indeed, 88 percent of the applicants who hired an agent did not have to take the driver's exam before getting a license, while almost all of the other applicants did.

Perhaps the aspiring drivers who hired agents were better-qualified, so that their higher licensing rates and circumvention of the exam did not put other people at risk? Dream on. The drivers who used an agent had much lower scores on the follow-up drivers exam given by the researchers.

This study confirms the view of the World Bank, which "has identified corruption as among the greatest obstacles to economic and social development." Payoffs at the Indian DMV may save some qualified drivers some time. But it has the bad direct effect of allowing unsafe drivers on the road. And it has an even more corrosive indirect effect: If bribes are more likely to get them a license than driving lessons, applicants have too little incentive to learn how to drive before hitting the road—and each other. The lesson applies beyond the DMV. If bribing a procurement officer works better than building a solid airplane or bridge, why bother with safety checks? Dealing with by-the-book Pattys and Selmas is pretty unpleasant. But a world without them is much worse.

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