The New Nation - Internet Edition

BSS, Dhaka

Extortions might have a more serious impact in the developing countries, while the developed countries are more likely to thwart it with their well-developed legal and institutional structures.

This was highlighted in a seminar paper titled "Bribery versus extortion: allowing the lesser of the two evils," presented by Fahad Khalil of Department of Economics of the University of Washington, Seattle.

The Bangladesh Institute of Development Studies (BIDS) organised the seminar at its conference room here on Sunday. Director General of the BIDS Dr Quazi Shahabuddin chaired it while former Finance secretary turned minister AMA Muhit, Research Director of the BIDS Dr M Asaduzzaman, among others, spoke.

Both bribery and extortion weaken the power of incentives, Fahad Khalil said in his paper, adding that there is a tradeoff in fighting the two since rewards to prevent supervisors from accepting bribes create incentives for extortion.

He said, a fear of inducing extortion may make it optimal to allow bribery, but extortion is never tolerated and added that extortion penalises the agent after "good behavior", while bribery penalises the agent after "bad behaviour".

Extortion is a more serious issue when incentives are primarily based on soft information and the agent has a greater bargaining power in negotiating an illegal payment or has a weaker outside opportunities, he opined.

Extortion is a particularly debilitating form of corruption that lead not only to inefficiencies but the alienation of citizens from their government, Fahad Khalil mentioned in his paper.

Why both should not be deterred, although extortion is worse than bribery, he questioned referring a study suggesting that even if it is feasible to deter both, it is optimal to allow bribery when information is soft, but most of the studies suggested that deterring bribery is the optimal.

Muhit said, bribery encourages extortion and both forms of corruption should be deterred.