Corruption in Driving Licenses in Delhi

This paper studies the process of obtaining a driving licence in Delhi. On the average, individuals pay about twice the official amount to obtain a licence and very few take the legally required driving test, resulting in many unqualified yet licenced drivers. The magnitude of distortions in the allocation of licences increases with citizens’ willingness to pay for licences. These results support the view that corruption does not merely reflect transfers from citizens to bureaucrats but that it distorts allocation. The paper also shows that partial anti-corruption measures have only a limited impact because players in this system adapt to the new environment. Specifically, a ban on agents at one regional transport office is associated with a high percentage of unqualified drivers overcoming the residency requirement and obtaining licenses at other RTOS.