Corruption, Norms, And Legal Enforcement: Evidence From Diplomatic Parking Tickets essay paper

Corruption, Norms, and Legal Enforcement: Evidence from Diplomatic Parking Tickets Author(s): Raymond Fisman and Edward Miguel Source: Journal of Political Economy, Vol. 115, No. 6 (December 2007), pp. 1020-1048 Published by: The University of Chicago Press Stable URL: http://www.jstor.org/stable/10.1086/527495 Corruption, Norms, And Legal Enforcement: Evidence From Diplomatic Parking Tickets.

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[ Journal of Political Economy, 2007, vol. 115, no. 6] � 2007 by The University of Chicago. All rights reserved. 0022-3808/2007/11506-0002$10.00

Corruption, Norms, and Legal Enforcement: Evidence from Diplomatic Parking Tickets

Raymond Fisman Columbia University and National Bureau of Economic ResearchCorruption, Norms, And Legal Enforcement: Evidence From Diplomatic Parking Tickets

Edward Miguel University of California, Berkeley and National Bureau of Economic Research

We study cultural norms and legal enforcement in controlling cor- ruption by analyzing the parking behavior of United Nations officials in Manhattan. Until 2002, diplomatic immunity protected UN dip- lomats from parking enforcement actions, so diplomats’ actions were constrained by cultural norms alone. We find a strong effect of cor- ruption norms: diplomats from high-corruption countries (on the basis of existing survey-based indices) accumulated significantly more unpaid parking violations. In 2002, enforcement authorities acquired the right to confiscate diplomatic license plates of violators. Unpaid violations dropped sharply in response. Cultural norms and (partic- ularly in this context) legal enforcement Corruption, Norms, And Legal Enforcement: Evidence From Diplomatic Parking Tickets are both important deter- minants of corruption.

We thank Stefano Dellvigna, Seema Jayachandran, Dean Yang, Luigi Zingales, and sem- inar participants at the Harvard Development Economics Lunch, Harvard Behavioral Economics Seminar, Harvard Kennedy School of Government, Harvard Political Economy discussion group, University of Michigan, London School of Economics, University of Southern California, Stockholm University, University of California, Berkeley, Northwest- ern University, University of Hawaii, Syracuse University, Harvard Business School, World Bank, University of Toronto, two anonymous referees, and Steve Levitt for helpful sug- gestions. Daniel Hartley, Adam Sacarny, and Sarath Sanga provided superb research as- sistance. We thank Gillian Sorensen for helpful discussions. We are especially grateful to the New York City Department of Finance for providing us with data on parking violations and National Public Radio for alerting us to theCorruption, Norms, And Legal Enforcement: Evidence From Diplomatic Parking Tickets existence of these data. All errors are our own.

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corruption, norms, and legal enforcement 1021

I. Introduction

The underlying causes of corruption remain poorly understood and widely debated. Yet the study of corruption beyond the realm of opinion surveys is still in its infancy, and there is little firm evidence relating corruption to real-world causal factors. Notably, both social norms and legal enforcement are often mentioned as primary contributors to cor- ruption in both the academic literature and the popular press, yet there is no evidence beyond the most casual of cross-country empirics.1

Distinguishing between the effects of social norms and legal enforce- ment is confounded by problems of identification: societies that collec- tively place less importance on rooting out corruption, and thus have weak anticorruption social norms, may simultaneously have less legal enforcement. Understanding the relative importance of these potential causes of corruption is of central importance in reforming public in- stitutions to improve governance and in the current debate in foreign aid policy. The World Bank emphasizes effectiveness of legal enforce- ment, but social reformers have highlighted the importance of changing civic norms in anticorruption efforts.2

We develop an empirical approach for evaluating the role of both social norms and legal enforcement in corruption by studying parking violations among United Nations diplomats living in New York City. Mission personnel and their families benefit from diplomatic immunity, a privilege that allowed them to avoid paying parking fines prior to November 2002. The act of parking illegally fits well with a standard definition of corruption, that is, “the abuse of entrusted power for pri- vate gain,”3 suggesting that the comparison of parking violations by diplomats from different societies serves as a plausible measure of the extent of corruption social norms or a corruption “culture.”

This setting has a number of advantages for studying corruption norms. Most important, our approach avoids the problem of differential legal enforcement levels across countries and more generally strips out enforcement effects prior to the New York City government’s enforce-

1 See Lambsdorff (2006) for an overview of findings on the determinants of corruption based on cross-country comparisons. Witzel (2005) provides one of many discussions on the topic in the popular press. The effects of legal enforcement on crime in general have been much examined theoretically, beginning with Becker (1968). Theories of norms and corruption are presented in Mauro (2004), which discusses models of multiple equilibria in corruption levels that could be interpreted as capturing corruption culture, and in Tirole (1996), which develops a model of bureaucratic collective reputation that also implies persistent corruption.

2 One successful anticorruption reformer who focused on changing norms as an element of reform, and who is well cited in the international media, is Antanas Mockus, the former mayor of Bogotá, Colombia (Rockwell 2004).

3 This is the definition used by the leading anticorruption organization Transparency International (see http://ww1.transparency.org/about_ti/mission.html).

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1022 journal of political economy

ment actions of November 2002, since there was essentially no enforce- ment of diplomats’ parking violations before this time. We thus interpret diplomats’ behavior as reflecting their underlying propensity to break rules for private gain when enforcement is not a consideration. Dip- lomats to UN missions are also a relatively homogeneous group, selected for similar official duties in New York. Additionally, because UN missions are overwhelmingly colocated in Midtown Manhattan—87 percent of missions are located within 1 mile of the UN complex—we avoid many concerns of unobserved differences in parking availability across geo- graphic settings.

This approach allows us to construct a “revealed preference” measure of corruption among government officials across 149 countries, based on real rule breaking in parking.4 Corruption levels, particularly across countries, have proved challenging to measure objectively because of the illicit nature of corrupt activities. In our main empirical results, we find that this parking violation corruption measure is strongly positively correlated with other (survey-based) country corruption measures and that this relationship is robust to conditioning on region fixed effects, country income, and a wide range of other controls, including govern- ment employee salary measures. This suggests that home country cor- ruption norms are an important predictor of propensity to behave cor- ruptly among diplomats: those from low-corruption countries (e.g., Norway) behave remarkably well even in situations in which there are no legal consequences, whereas those from high-corruption countries (e.g., Nigeria) commit many violations. It also goes somewhat against the predictions of standard economic models of crime in situations of zero legal enforcement (e.g., Becker 1968), which would predict high rates of parking violations among all diplomats in the absence of enforcement.

The natural experiment of New York City diplomatic parking privi- leges also allows for a direct comparison of the effects of norms versus enforcement by exploiting a sharp increase in the legal punishment for parking violations. Starting in November 2002, New York City began stripping the official diplomatic license plates from vehicles that accu- mulated more than three unpaid parking violations. This credible in- crease in enforcement—the city government made examples of 30 coun- tries by having their vehicles’ plates stripped in October 20025—led to immediate and massive declines of approximately 98 percent in parking violations (see fig. 1 below). Thus, cultural norms matter for crime, but so does enforcement, a finding that resonates with the work of Becker

4 In this sense, our corruption measure is conceptually similar to the Economist magazine’s “Big Mac Index” as a measure of country purchasing power parity.

5 Refer to Fries (2002) for an example of media coverage.

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corruption, norms, and legal enforcement 1023

(1968), Levitt (1997, 2004), Di Tella and Schargrodsky (2003), and others on the responsiveness of crime to punishment. In our setting, the impact of legal enforcement appears larger than the effects of var- iation in cultural norms across countries.

The main theoretical implication of these empirical patterns, taken together, is that both cultural norms and legal enforcement play key roles in government officials’ corruption decisions. They suggest that both factors should be taken seriously in debates about the causes of corruption and the policy measures to combat it.

Since the parking violations data exist at the individual level for all UN mission diplomats present in New York City (numbering roughly 1,700 at the start of our study period), we can examine how individual behavior evolves over time. For diplomats from high-corruption coun- tries of origin, a model of convergence to U.S. corruption norms would (presumably) predict a decline in the rate of parking violations over time, as tenure in the United States increases. By contrast, a model of convergence to the “zero-enforcement” norm discussed above would imply an increase in violations over time, particularly for officials from low-corruption countries. We find evidence that the frequency of vio- lations increases with tenure in New York City and that these increases are particularly large for diplomats from low-corruption countries, sug- gesting that there is partial convergence to the zero-enforcement norm over time.

Beyond contributing to the large literature in economics on the de- terminants of legal compliance, our work is part of a growing body of research on the importance of cultural background in explaining in- dividual behavior. Much of this work compares the outcomes and actions of immigrant groups from different countries. For example, Borjas (2000) finds that home country attributes are predictive of immigrants’ economic achievement. In the social domain, Fernandez and Fogli (2006) show that fertility rates among Americans are correlated with fertility in their countries of ancestry. In work also related to ours, Ichino and Maggi (2000) study absenteeism and misconduct of employees at an Italian bank and find that region of origin within Italy predicts shirking.

We also seek to contribute to the growing empirical literature on corruption specifically. Other recent empirical research emphasizes the importance of developing corruption measures based on real-world de- cisions rather than survey responses; see Reinikka and Svensson (2004) and Olken (2006) for discussions. This article is the first to our knowl- edge to develop a revealed preference measure of corruption that is comparable across countries. Finally, the importance of norm compli- ance and nonselfish behavior has been documented in the laboratory

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1024 journal of political economy

(see, e.g., Ledyard 1995), and more recently Levitt (2006) provides evidence on norms of nonselfish behavior in the field.

The rest of the article proceeds as follows: Section II describes the diplomatic parking situation in New York City and the violations data, Section III discusses the rest of the data set, Section IV contains the empirical results, and Section V presents conclusions.

II. Diplomatic Parking Violations in New York City

Diplomatic representatives to the United Nations and their families are given immunity from prosecution or lawsuits in the United States. The original intent of these laws was to protect diplomats from mistreatment abroad, especially in countries not on friendly terms with the home country.6 However, these days diplomatic immunity is more commonly viewed as the “best free parking pass in town” (BBC News 1998). Dip- lomatic vehicles in New York possess license plates tagged with the letter D, which signals diplomatic status.7 While these vehicles may be ticketed, the car’s registrant is shielded from any punishment for nonpayment of the ticket. Thus one immediate implication of diplomatic immunity— not just in New York, but also in most other capitals (e.g., London [BBC News 1998], Paris [Agence Presse–France 2005], and Seoul [Korea Times 1999])—has been that it allows diplomats to park illegally but never suffer the threat of legal punishment, leaving a “paper trail” of the illegal acts (see http://www.state.gov/m/ds/immunities/c9127.htm). To illus- trate the magnitude of the problem, between November 1997 and the end of 2002 in New York City, diplomats accumulated over 150,000 unpaid parking tickets, resulting in outstanding fines of more than $18 million.

The New York City parking violations data are at the level of the individual unpaid violation.8 Drivers have 30 days to pay a ticket before it goes into default, at which point an additional penalty is levied (gen- erally 110 percent of the initial fine). Diplomats then receive an addi- tional 70 days to pay the ticket plus this penalty before it is recorded in our data set as an unpaid violation in default. The information on each violation includes the license plate number; the name and country of origin of the car’s registrant; the date, time, and location of the

6 While the origins of diplomatic protection date back many centuries, the current incarnation is found in the 1961 Vienna Convention on Diplomatic Relations. See http://www.un.int/usa/host_dip.htm for the full text.

7 Note that while the vehicle’s diplomatic status is revealed by the license plate, the country codes denoting particular countries are unrelated to country names; e.g., the code (at the start of the plate number) for Mozambique is QS and the code for Nigeria is JF.

8 We gratefully acknowledge the New York City Department of Finance, in particular Sam Miller and Gerald Koszner, for compiling these data.

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corruption, norms, and legal enforcement 1025

violation; the fine and penalty levied; and the amount paid (if any). The most common violation in our data was parking in a No Standing— Loading Zone (43 percent of violations), which is typically parking in someone else’s driveway or business entrance. The remainder were spread across a range of violation types that imply varying degrees of social harm:9 fines for expired meters accounted for 6 percent of the total, double-parking 5 percent, and parking in front of a fire hydrant 7 percent, for instance. Also note that in 20 percent of violations the registrant is the mission itself, signifying an official rather than personal vehicle. While the majority of violations are located within a mile of either the country’s UN mission or the UN complex, many are com- mitted in other parts of the city. We return to the issue of violation location below. The total period of coverage in our data set is November 24, 1997, to November 21, 2005. (Refer to the Data Appendix for more on the data set.)

A crucial change in legal enforcement took place in October 2002, when the State Department gave New York City permission to revoke the official diplomatic plates of vehicles with three or more outstanding unpaid violations (Steinhauer 2002). In addition, the Clinton-Schumer Amendment (named after the two New York senators), put in place at the same time, allowed the city to petition the State Department to have 110 percent of the total amount due deducted from U.S. foreign aid to the offending diplomats’ country, although this latter punishment was never invoked in practice (Singleton 2004).

In constructing our data set, we generate separate measures of the extent of unpaid violations for the pre-enforcement (November 1997– October 2002) and postenforcement (November 2002–November 2005) periods. In each case, we employ the total number of unpaid diplomatic parking violations for a particular country. In order to control for base- line mission size, we calculate the total number of UN permanent mis- sion staff with diplomatic privileges using the UN Blue Book for May 1998. Published twice annually, the Blue Book lists all UN mission staff, as well as their official titles. We additionally use UN Blue Books for 1997–2005 to track the UN tenure of individual diplomats. Fortunately, the Blue Books generally use consistent spellings across editions, facil- itating automated matching across time. In most cases, the spelling and format were also consistent with the names in the parking violations data; the algorithm automatically matched 61 percent of diplomats in the violations database. The first Blue Book we use is from January 1997,

9 Almost all parking violations in the data set resulted in fines of US$55, making it impossible to assess the extent of social damage by violations’ relative prices.

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1026 journal of political economy

and we use this as our start date for calculating tenure at the United Nations.10

We obtained data on the number of diplomatic license plates regis- tered to each mission from the U.S. State Department’s Office of Foreign Missions, and we use these data as a control variable in some specifi- cations. Unfortunately, these data are available only for 2006, though we were assured that the numbers are largely stable over time.11

Table 1 presents the annual number of violations per diplomat by country during the pre-enforcement period (November 1997–October 2002) and the postenforcement period (November 2002–November 2005), along with the total number of diplomats in May 1998. Overall, the basic pattern accords reasonably well with common perceptions of corruption across countries. The worst parking violators—the 10 worst (in order) are Kuwait, Egypt, Chad, Sudan, Bulgaria, Mozambique, Al- bania, Angola, Senegal, and Pakistan—all rank poorly in cross-country corruption rankings (described below), with the exception of Kuwait. The raw correlation between the country corruption rankings and pre- enforcement parking violations per diplomat is �0.18, and that between the corruption ranking and postenforcement violations per capita is �0.24. While many of the countries with zero violations accord well with intuition (e.g., the Scandinavian countries, Canada, and Japan), there are a number of surprises. Some of these are countries with very small missions (e.g., Burkina Faso and the Central African Republic), and a few others have high rates of parking violations but do pay off the fines (these are Bahrain, Malaysia, Oman, and Turkey; we return to this issue below). The smallest missions may plausibly have fewer violations since each mission is given two legal parking spaces at the United Nations, and this may suffice if the country has very few diplomats.

Figure 1 plots the total violations per month during November 1997– November 2005. There are two clear declines in the number of viola- tions. The first comes in September 2001, corresponding to the period following the World Trade Center attack. The second and extremely pronounced decline coincides with increased legal enforcement of dip- lomatic parking violators.

10 That is, we cannot distinguish among arrival times pre-1997, and all individuals in- cluded in the January 1997 Blue Book are coded as arriving in that month. As a robustness check, we also limit the sample only to diplomats who were not yet present in New York in the 1997 Blue Book (reducing the sample slightly), which allows us to more accurately capture arrival date.

11 We thank Murray Smith of the U.S. Office of Foreign Services for these data and for many useful conversations.

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