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Intermediated Corruption

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  • Elton Dusha

Abstract

I model the role of intermediaries in corruption and examine the effects of policy on the level of intermediated corruption, price of permits, and welfare. Intermediaries with a history of being honest earn higher premiums. The frequency of corrupt transactions is inversely related to income levels. When the government increases the fraction of profits that it extracts from entrepreneurs, intermediation intensifies, as entrepreneurs are reluctant to obtain licenses through legal means. Therefore, when business costs are high, measures to combat corruption transfer value to intermediaries. Increasing the frequency of governments audits can increase the equilibrium price of permits.

Suggested Citation

  • Elton Dusha, 2015. "Intermediated Corruption," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56(3), pages 997-1017, August.
    • Handle: RePEc:wly:iecrev:v:56:y:2015:i:3:p:997-1017
    DOI: 10.1111/iere.12129
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