Market reforms in developing and transition economies have sometimes failed to deliver the desired welfare effects. Corruption may be an important reason for the ineffciency of market reforms, such as privatization campaigns. The present paper demonstrates how corruption can affect the choice of buyer of a public asset. Our main result is that market reform in highly corrupt societies is likely to result in less competition and less economic effciency than reform in less corrupt societies. We also demonstrate that the level of bribes in the sale of public assets does not necessarily increase in the government's emphasis on bribes.
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Paper provided by CMI (Chr. Michelsen Institute), Bergen, Norway in its series CMI Working Papers with number
WP 2003:7.
Find related papers by JEL classification: F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
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