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Competition in bureaucracy and corruption

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  • Drugov, Mikhail
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    Abstract

    This paper studies the consequences of introducing competition between bureaucrats. Firms are supposed to invest into eliminating negative externalities of production, while bureaucrats administer the process by issuing licences. Some bureaucrats are corrupt, that is, they issue a licence to any firm in exchange for a bribe. The competition regime is found to create more ex ante incentives for firms to invest, while the monopoly regime is better at implementing ex post allocation, that is, distributing the licences given the firms' investment decisions. Additional results on the effect of punishments and bureaucrats' rotation are provided.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Development Economics.

    Volume (Year): 92 (2010)
    Issue (Month): 2 (July)
    Pages: 107-114

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    Handle: RePEc:eee:deveco:v:92:y:2010:i:2:p:107-114

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    Web page: http://www.elsevier.com/locate/devec

    Related research

    Keywords: Corruption Competition Bureaucracy Red tape;

    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Ariane Lambert-Mogiliansky & Mukul Majumdar & Roy Radner, 2008. "Petty corruption: A game-theoretic approach," International Journal of Economic Theory, The International Society for Economic Theory, vol. 4(2), pages 273-297.
    2. Laffont, Jean-Jacques & N'Guessan, Tchetche, 1999. "Competition and corruption in an agency relationship," Journal of Development Economics, Elsevier, vol. 60(2), pages 271-295, December.
    3. Bliss, Christopher & Di Tella, Rafael, 1997. "Does Competition Kill Corruption?," Journal of Political Economy, University of Chicago Press, vol. 105(5), pages 1001-23, October.
    4. Cadot, Olivier, 1987. "Corruption as a gamble," Journal of Public Economics, Elsevier, vol. 33(2), pages 223-244, July.
    5. Saha, Bibhas, 2001. "Red tape, incentive bribe and the provision of subsidy," Journal of Development Economics, Elsevier, vol. 65(1), pages 113-133, June.
    6. Acemoglu, D. & Verdier, T., 1997. "The Choice between Market Failures and Corruption," DELTA Working Papers 97-06, DELTA (Ecole normale supérieure).
    7. Polinsky, A. Mitchell & Shavell, Steven, 2001. "Corruption and optimal law enforcement," Journal of Public Economics, Elsevier, vol. 81(1), pages 1-24, July.
    8. Rafael Di Tella & Alberto Ades, 1999. "Rents, Competition, and Corruption," American Economic Review, American Economic Association, vol. 89(4), pages 982-993, September.
    9. Ahlin, Christian & Bose, Pinaki, 2007. "Bribery, inefficiency, and bureaucratic delay," Journal of Development Economics, Elsevier, vol. 84(1), pages 465-486, September.
    10. Guriev, Sergei, 2004. "Red tape and corruption," Journal of Development Economics, Elsevier, vol. 73(2), pages 489-504, April.
    11. Banerjee, A.V., 1997. "A Theory of Misgovernance," Working papers 97-4, Massachusetts Institute of Technology (MIT), Department of Economics.
    12. Mookherjee, Dilip & Png, I P L, 1995. "Corruptible Law Enforcers: How Should They Be Compensated?," Economic Journal, Royal Economic Society, vol. 105(428), pages 145-59, January.
    13. Banerjee, Abhijit V, 1997. "A Theory of Misgovernance," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1289-1332, November.
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    Cited by:
    1. Anna Kochanova, 2012. "The Impact of Bribery on Firm Performance: Evidence from Central and Eastern European Countries," CERGE-EI Working Papers wp473, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
    2. Ryvkin, Dmitry & Serra, Danila, 2012. "How corruptible are you? Bribery under uncertainty," Journal of Economic Behavior & Organization, Elsevier, vol. 81(2), pages 466-477.
    3. Roy Cerqueti & Raffaella Coppier & Gustavo Piga, 2011. "Corruption, Growth and Ethnic Fractionalization: a Theoretical Model," CEIS Research Paper 216, Tor Vergata University, CEIS, revised 08 Nov 2011.
    4. Lamar Pierce & Michael W. Toffel, 2010. "The Role of Organizational Scope and Governance in Strengthening Private Monitoring," Harvard Business School Working Papers 11-004, Harvard Business School, revised Feb 2012.
    5. Popov, Sergey V., 2012. "Decentralized Bribery and Market Participation," MPRA Paper 43829, University Library of Munich, Germany, revised 16 Jan 2013.
    6. Victor Manuel Bennett & Lamar Pierce & Jason A. Snyder & Michael W. Toffel, 2012. "Competition and Illicit Quality," Harvard Business School Working Papers 12-071, Harvard Business School, revised May 2012.

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