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Intermediation in corruption markets

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Author Info

  • Gautam Bose
  • Shubhashis Gangopadhyay

Abstract

Purpose – Consider a government benefit that is earmarked for a group of people “deserving” the benefit. Corruption happens when undeserving candidates obtain the benefit with the help of corrupt officials. Often, such corrupt activities are mediated by professional touts who act as intermediaries between the undeserving candidates and the corrupt officials. The purpose of this paper is to analyze the equilibrium in such an intermediated market. Design/methodology/approach – A queuing model was theoretically analyzed where candidates wait in line to obtain the benefit. Undeserving candidates can also obtain the service – in exchange for a bribe – if they happen to wait at a counter with a corrupt clerk. The intermediary collects information to find out which clerks are corrupt, and charges a fee to direct candidates to an honest or corrupt clerk, as the candidate may choose. Findings – In a market with a single intermediary we show that, under fairly general conditions: the intermediary is active; both deserving and undeserving candidates use the service of the intermediary; welfare in an economy with an intermediary is lower than that in an economy without intermediaries; and under some conditions, an optimal response to corruption is to reduce the number of officials dispensing the benefit. Originality/value – This paper provides a framework within which intermediated markets for corruption can be analysed. The framework is easy to adapt and can accommodate social costs other than waiting costs. The conclusion suggests more complex scenarios that may be analysed using the approach in this model. JEL Classification: D73, H80, K42

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Bibliographic Info

Article provided by Emerald Group Publishing in its journal Indian Growth and Development Review.

Volume (Year): 2 (2009)
Issue (Month): 1 (April)
Pages: 39-55

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Handle: RePEc:eme:igdrpp:v:2:y:2009:i:1:p:39-55

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Related research

Keywords: Corruption; Intermediaries; Social benefits; Social welfare;

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Citations

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Cited by:
  1. Fredriksson, Anders, 2014. "Bureaucracy intermediaries, corruption and red tape," Journal of Development Economics, Elsevier, vol. 108(C), pages 256-273.
  2. Gil S. Epstein & Ira N. Gang, 2010. "Why Pay Taxes When No One Else Does?," Review of Development Economics, Wiley Blackwell, vol. 14(2), pages 374-385, 05.
  3. Mikhail Drugov & John Hamman & Danila Serra, 2014. "Intermediaries in corruption: an experiment," Experimental Economics, Springer, vol. 17(1), pages 78-99, March.
  4. Chaudhuri, Sarbajit & Mandal, Biswajit, 2012. "Bureaucratic reform, informal sector and welfare," MPRA Paper 36072, University Library of Munich, Germany.
  5. Anders Fredriksson, 2013. "Bureaucracy Intermediaries, Corruption and Red Tape," Working Papers 1202, University of Namur, Department of Economics.

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