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Tariffs, Quotas, and the Corrupt Purchasing of Inappropriate Technology

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  • Neil Campbell

    (Department of Applied and International Economics, Massey University, New Zealand)

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    Abstract

    This paper develops a simple model where a manager of a firm in a Less-Developed Country (LDC) has the choice of whether or not to purchase an inappropriate technology in return for a bribe (kick-back) from the supplier of the technology. Provided that the manager achieves some minimum level of profit, the manager has a positive probability of not getting caught taking the bribe. The actual size of the bribe is determined by Nash axiomatic bargaining between the manager and the supplier. An interesting and not immediately obvious result is that, under certain circumstances, if the protective instrument is changed from a quota to an equivalent tariff the manager will switch from not acting corruptly to acting corruptly.

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    Bibliographic Info

    Article provided by College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan in its journal International Journal of Business and Economics.

    Volume (Year): 4 (2005)
    Issue (Month): 1 (April)
    Pages: 1-9

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    Handle: RePEc:ijb:journl:v:4:y:2005:i:1:p:1-9

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    Related research

    Keywords: kick-backs; corruption; managerial discretion; border protection;

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    References

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    1. James E. Anderson, 1988. "The Relative Inefficiency of Quotas," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262511789, December.
    2. Campbell, Neil, 1998. "Can We Believe in Cold Showers?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 13, pages 131-162.
    3. Jain, Arvind K, 2001. " Corruption: A Review," Journal of Economic Surveys, Wiley Blackwell, vol. 15(1), pages 71-121, February.
    4. Mauro, Paolo, 1998. "Corruption and the composition of government expenditure," Journal of Public Economics, Elsevier, vol. 69(2), pages 263-279, June.
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