How Does Bribery Affect Public Service Delivery? Micro-Evidence from Service Users and Public Officials in Peru

Poor governance can affect greatly public service delivery, both directly through higher price, and indirectly through lower quality or quantity available. When seeking a public service, users may be required to pay in bribes significantly more than the official price. Consequently, some users may be discouraged and choose not to seek a service needed due to the higher price imposed by the bribery quot;tax.quot; In this paper we explore both the price and the quantity components of the relationship between governance and services delivery using micro-level survey data: the bribery quot;taxquot; itself (which a priori may be regressive or progressive), as well as the quot;discouraged user effectquot; of such tax. To do this, we construct new measures of governance using data from users of public services from 13 government agencies in Peru. In analyzing the costs borne by users to obtain public services, we find that for certain basic services low income users pay a larger share of their income than wealthier ones, i.e., the bribery tax is regressive. Where there are few substitute private providers and thus a low price elasticity of the demand for public services for any income category, as in the case of basic services, low income users appear to be discouraged more often than not to seek such a basic service than wealthier ones. Thus, bribery may penalize poorer users twice over, first by acting as a regressive tax, and then as a discriminating mechanism for access to basic services.We then explore the household's characteristics when attempting to obtain a public service. The analysis suggests that higher education and age are associated with a higher probability of not seeking a public service. Trust in state institutions also influences the user's behavior and decreases the probability of being discouraged. Further, knowledge of the mechanisms to report corruption and extent of social network increase the probability to be a discouraged user of public services, suggesting that the household may rely on substitutes through the network. Finally, we complement the household level demand-side analysis with a supply-side analysis based on the responses from the survey of public officials, and construct agency-level measures for both access to public services and institutional factors. Econometric results suggest that corruption reduces the supply of services, while voice mechanisms and clarity of the public agency's mission increases it