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Corrupt Relational Contracting

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Abstract

Because corruption must be hidden from the public and is not enforced by courts it entails transaction costs, which are larger than those from legal exchange. This suggests that corrupt contracts are primarily relational contracts where legal exchange serves as a basis for sealing and enforcing corrupt agreements. Legal exchange not only provides for corrupt opportunities, but for the necessary enforcement mechanisms. Examples of such legal exchange are long-term business exchange, belonging to the same firm or political party or being embedded in social relationships. The latter may even comprise the engagement in charitable institutions. Reform should not only focus on limiting opportunities for corrupt behavior but also on impeding the enforcement of corrupt agreements.

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File URL: http://www2.vwl.wiso.uni-goettingen.de/departmentpaper/NO_113.pdf
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Bibliographic Info

Paper provided by University of Goettingen, Department of Economics in its series Departmental Discussion Papers with number 113.

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Date of creation: 01 May 2002
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Handle: RePEc:got:vwldps:113

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Postal: Platz der Göttinger Sieben 3 - D-37073 Göttingen
Web page: http://www.economics.uni-goettingen.de
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Related research

Keywords: Corruption; Secrecy; Transaction costs; Opportunism; Reputation; Trust;

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Cited by:
  1. Mathias Nell, 2009. "Contracts obtained by means of bribery: should they be void or valid?," European Journal of Law and Economics, Springer, vol. 27(2), pages 159-176, April.
  2. Mikael Priks, 2012. "Competition among officials and the abuse of power," Public Choice, Springer, vol. 150(3), pages 425-438, March.
  3. Lambsdorff, Johann & Nell, Mathias, 2007. "Fighting corruption with asymmetric penalties and leniency," Center for European, Governance and Economic Development Research Discussion Papers 59, University of Goettingen, Department of Economics.
  4. Goel, Rajeev K. & Korhonen, Iikka, 2009. "Composition of Exports and Cross-Country Corruption," BOFIT Discussion Papers 5/2009, Bank of Finland, Institute for Economies in Transition.
  5. Thies Büttner & Robert Schwager, 2003. "Regionale Verteilungseffekte der Hochschulfinanzierung und ihre Konsequenzen," Departmental Discussion Papers 119, University of Goettingen, Department of Economics.
  6. Goel, Rajeev K. & Nelson, Michael A., 2007. "Are corrupt acts contagious?: Evidence from the United States," Journal of Policy Modeling, Elsevier, vol. 29(6), pages 839-850.
  7. Renate Ohr, 2009. "European Monetary Union at Ten: Had the German Maastricht Critics Been Wrong?," Departmental Discussion Papers 141, University of Goettingen, Department of Economics.
  8. Salvatore Barbaro, 2002. "The Distributional Impact of Subsidies to Higher Education - Empirical Evidence from Germany," Departmental Discussion Papers 114, University of Goettingen, Department of Economics.
  9. Sascha Wolff, 2006. "Migration und ihre Determinanten im ost-westdeutschen Kontext nach der Wiedervereinigung: Ein Literaturüberblick," Departmental Discussion Papers 130, University of Goettingen, Department of Economics.
  10. Petra Enß & Robert Schwager, 2006. "Kommunaler Finanzausgleich und Gewerbesteuerhebesätze in Niedersachsen," Departmental Discussion Papers 127, University of Goettingen, Department of Economics.
  11. Goel, Rajeev K. & Nelson, Michael A., 2010. "Causes of corruption: History, geography and government," Journal of Policy Modeling, Elsevier, vol. 32(4), pages 433-447, July.
  12. Nadia Fiorino & Emma Galli & Fabio Padovano, 2012. "Do Fiscal Decentralization and Government Fragmentation Affect Corruption In Different Ways? Evidence from a Panel Data Analysis," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1217, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  13. Rajeev K. Goel & Michael A. Nelson, 2010. "Decentralization of the Size and Scope of Local Governments and Corruption," Working Papers CEB 10-031, ULB -- Universite Libre de Bruxelles.
  14. Corinna Ahlfeld, 2009. "The scapegoat of heterogeneity - How fragmentation influences political decisionmaking," Departmental Discussion Papers 143, University of Goettingen, Department of Economics.
  15. Lambsdorff, Johann & Nell, Mathias, 2007. "Fighting corruption with asymmetric penalties and leniency," Center for European, Governance and Economic Development Research Discussion Papers 59, University of Goettingen, Department of Economics.
  16. Salvatore Barbaro, 2003. "The Combined Effect of Taxation and Subsidization on Human Capital Investment," Departmental Discussion Papers 116, University of Goettingen, Department of Economics.
  17. Salvatore Barbaro & Jens Südekum, 2004. "Reforming a complicated income tax system: The political economics perspective," Departmental Discussion Papers 120, University of Goettingen, Department of Economics.
  18. Graf Lambsdorff, Johann & Nell, Mathias, 2005. "Let them take gifts, and cheat those who seek influence," Passauer Diskussionspapiere, Volkswirtschaftliche Reihe V-41-05, University of Passau, Faculty of Business and Economics.

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