Driver's Licenses in Delhi

Official cost of driver's license (in Delhi): Rs. 450
Average actual expenditure for getting a driver's license: Rs. 1127

This is from an excellent paper, available here, by Sendhil Mullainathan, Rema Hanna, Simeon Djankov and Marianne Bertrand. A lot is written in academic papers about corruption but few go into the nuts and bolts of corruption, how much it costs and what are the main consequences of corruption.

The data from the paper was gathered by hiring a bunch of prospective drivers in Delhi to document their experiences in trying to obtain a license. Some were given a reward for trying to obtain a license faster while others were given free driving lessons. The majority of the participants in the study, instead of going through the official route to get a license, instead hired an agent.

Agents are technically illegal but, as is the case with many government services in India, offer an easy way to get a license for those willing to pay extra money. Those who hired an agent spent Rs. 720 more than those who did not. Those who hired an agent also spent two hours less at the Regional Transport Office than those who did not.

The real key statistic in the paper, however, is that only 12% of those who hired an agent actually took an official driving test as compared to 94% of those who did not hire an agent. And when these two groups were both given unofficial driving tests by researchers, those who hired agents were slightly more likely to fail than those who did not (38% failure rate as opposed to 31%).

Aside from the costs of an inefficient bureaucracy, which can be crudely estimated as Rs. 677 per license (the difference between official and unofficial expenditure), the fact that there exists a way for people to bypass the driving test means the main reason for having driver's licenses in the first place (ensuring competent drivers) is not fulfilled in practice. An additional possibility suggested by this paper is that having such an inefficient and frustrating system for getting a driver's license serves to enrich agents by pushing more applicants to use agents' services. The exact relationship between low-level RTO officials or clerks and the agents is not spelled out in the paper, but it should be pretty clear that an economic relationship exists. Therefore, people at RTO may have an incentive to make your life as difficult as possible so that you will go to an agent instead. This system serves as a substitute for outright bribery which, according to the study, was not common among the participants.

(If anyone wants to dispute the notion that bribery is uncommon at RTO offices, feel free to comment.)

Also, here's a post on a comparison between U.S. Department of Motor Vehicle (DMV) offices and the RTO. For those who don't live in the U.S., the DMV is widely regarded as being the embodiment of incompetence and ineffectual bureaucracy. Having to go to the DMV office is like being cast into the lowest circle of hell for many people. My own experiences have been rather uneventful, however. My home state of New Jersey has contracted out DMV management for several years now and all employees are trained on basic people skills so things usually seem to run pretty smoothly there. When I moved to California, I made an appointment to go to the DMV in Oakland online, arrived there at the specified time and left with my temporary license in about an hour-and-a-half (I already had a NJ driver's license so did not need to take a driving test). Experiences vary greatly, no doubt, but there is no rule set in stone that government services need be so lousy.