To overcome market failures society creates common laws that stimulate or penalize individual actions, the enforcement of which depends on the actions of public authorities who may be susceptible to corruption. We model this behaviour for an autocracy versus a democracy, using a microeconomic framework. We assume that in an autocracy rulers have a monopoly over the bribes market, whereas in a democracy conflicting groups compete in the bribes market. The models constructed produce results that are compatible with the well-known stylized facts, namely that (1) in a democracy the level of corruption is lower than in an autocracy, although still positive, that (2) in environments where the level of human capital is higher, regimes are closer to democracies and the level of corruption is lower, and that (3) the level of corruption is higher in more regulated economies.
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Article provided by Faculdade de Economia, Universidade de Coimbra in its journal Notas Económicas.
Find related papers by JEL classification: J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption C63 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Computational Techniques
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