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Corruption: Top Down or Bottom Up?

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Author Info
Christopher J. Waller
Thierry Verdier
Roy Gardner

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Abstract

This article studies the impact of corruption on an economy with a hierarchical government. In particular, we study whether centralizing corruption within the higher level of government increases or decreases the total amount of corruption. We show that when the after-tax relative profitability of the formal sector as compared to that of the informal sector is high enough, adding a layer of government increases the total amount of corruption. By contrast, for high-enough public wages and/or an efficient monitoring technology of the bureaucratic system, centralization of corruption at the top of the government hierarchy redistributes bribe income from the lower level to the upper level. In the process, total corruption is reduced and the formal sector of the economy expands. Copyright 2002, Oxford University Press.

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Publisher Info
Article provided by Oxford University Press in its journal Economic Inquiry.

Volume (Year): 40 (2002)
Issue (Month): 4 (October)
Pages: 688-703
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Handle: RePEc:oup:ecinqu:v:40:y:2002:i:4:p:688-703

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  1. JOhn Bennett & Saul Estrin, 2006. "Corruption and Bureaucratic Structure in a Developing Economy," William Davidson Institute Working Papers Series 825, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
    Other versions:
  2. Ekaterina Vostroknutova, 2003. "Shadow Economy, Rent-Seeking Activities and the Perils of Reinforcement of the Rule of Law," William Davidson Institute Working Papers Series 2003-578, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
    Other versions:
  3. Scott Gehlbach, 2003. "Taxability and Low-Productivity Traps," Working Papers w0029, Center for Economic and Financial Research (CEFIR). [Downloadable!]
  4. Daniel Kaufmann & Gil Mehrez & Tugrul Gurgur, 2003. "Voice or Public Sector Management? An Empirical Investigation of Determinants of Public Sector Performance based on a Survey of Public Officials," Econometrics 0308004, EconWPA. [Downloadable!]
  5. Shuanglin Lin & Wei Zhang, 2009. "The effect of corruption on capital accumulation," Journal of Economics, Springer, vol. 97(1), pages 67-93, May. [Downloadable!] (restricted)
  6. Shah, Anwar, 2006. "Corruption and decentralized public governance," Policy Research Working Paper Series 3824, The World Bank. [Downloadable!]
  7. Scott Gehlbach, 2003. "Taxability, Elections, and Government Support of Business Activity," Working Papers w0030, Center for Economic and Financial Research (CEFIR). [Downloadable!]
  8. Richard Bernardi & Michael Witek & Michael Melton, 2009. "A Four-Country Study of the Associations Between Bribery and Unethical Actions," Journal of Business Ethics, Springer, vol. 84(3), pages 389-403, February. [Downloadable!] (restricted)
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This page was last updated on 2009-11-19.

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