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Strategic analysis of petty corruption: Entrepreneurs and bureaucrats

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  • Ariane Lambert-Mogiliansky

    (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris)

  • Mukul Majumdar

    (Economics Department - Cornell University - Cornell University)

  • Roy Radner

    (Stern School of Business - New York University)

Abstract

This paper develops a game-theoretic model of "petty corruption" by government officials. Such corruption is widespread, especially (but not only) in developing and transition economies. The model goes beyond the previously published studies in the way it describes the structure of bureaucratic "tracks" and the information among the participants. Entrepreneurs apply, in sequence, to a "track" of two or more bureaucrats in a prescribed order for approval of their projects. Our first result establishes that in a one-shot situation no project ever gets approved. This result leads us to consider a repeated interaction setting. In that context we characterize in more detail the trigger-strategy equilibria that minimize the social loss due to the system of bribes, and those that maximize the expected total bribe income of the bureaucrats. The results are used to shed some light on two much advocated anti-corruption policies: the single window policy and rotation of bureaucrats.

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Bibliographic Info

Paper provided by HAL in its series PSE Working Papers with number halshs-00590706.

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Date of creation: Nov 2005
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Handle: RePEc:hal:psewpa:halshs-00590706

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Keywords: corruption ; entry procedures;

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References

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  1. Ariane Lambert-Mogiliansky & Mukul Majumdar & Roy Radner, 2005. "Strategic analysis of petty corruption: Entrepreneurs and bureaucrats," PSE Working Papers halshs-00590706, HAL.
  2. Lambert-Mogiliansky, Ariane & Majudar, Mukul & Radner, Roy, 2008. "Petty Corruption: A Game-Theoretic Approach," Working Papers 08-09, Cornell University, Center for Analytic Economics.
  3. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
  4. Marjit, Sugata & Mukherjee, Vivekananda & Mukherjee, Arijit, 2000. "Harassment, corruption and tax policy," European Journal of Political Economy, Elsevier, vol. 16(1), pages 75-94, March.
  5. Simeon Djankov & Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 2002. "The Regulation Of Entry," The Quarterly Journal of Economics, MIT Press, vol. 117(1), pages 1-37, February.
  6. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
  7. Roberto Burguet & Yeon-Koo Che, 2004. "Competitive Procurement with Corruption," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 50-68, Spring.
  8. Paolo Mauro, 1996. "The Effects of Corruptionon Growth, Investment, and Government Expenditure," IMF Working Papers 96/98, International Monetary Fund.
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Citations

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Cited by:
  1. Lambert-Mogiliansky, Ariane & Majumdar, Mukul & Radner, Roy, 2008. "Strategic Analysis of Petty Corruption with an Intermediary," Working Papers 08-11, Cornell University, Center for Analytic Economics.
  2. repec:hal:wpaper:halshs-00590706 is not listed on IDEAS
  3. Seung Yoo, 2008. "Petty corruption," Economic Theory, Springer, vol. 37(2), pages 267-280, November.
  4. Krishna Athreya & Monisankar Bishnu, 2010. "On the efficiency of ‘single window’," Economic Theory, Springer, vol. 43(2), pages 207-226, May.
  5. Evrensel, Ayse Y., 2010. "Corruption, growth, and growth volatility," International Review of Economics & Finance, Elsevier, vol. 19(3), pages 501-514, June.
  6. Lambert-Mogiliansky, Ariane & Majumdar, Mukul & Radner, Roy, 2007. "Strategic analysis of petty corruption: Entrepreneurs and bureaucrats," Journal of Development Economics, Elsevier, vol. 83(2), pages 351-367, July.
  7. Stéphane Straub, 2009. "Regulatory Intervention, Corruption and Competition," Review of Industrial Organization, Springer, vol. 35(1), pages 123-148, September.
  8. Majumdar, Mukul & Yoo, Seung Han, 2011. "Strategic Analysis of Influence Peddling," Working Papers 11-04, Cornell University, Center for Analytic Economics.
  9. Andreas Assiotis & Kevin Sylwester, 2013. "Do the effects of corruption upon growth differ between democracies and autocracies?," University of Cyprus Working Papers in Economics 06-2013, University of Cyprus Department of Economics.
  10. repec:hal:wpaper:halshs-00672963 is not listed on IDEAS
  11. Duanmu, Jing-Lin, 2011. "The effect of corruption distance and market orientation on the ownership choice of MNEs: Evidence from China," Journal of International Management, Elsevier, vol. 17(2), pages 162-174, June.
  12. Arvind K. Jain, 2011. "Corruption: Theory, Evidence and Policy," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 9(2), pages 3-9, 07.
  13. Johann Graf Lambsdorff, 2013. "Corrupt intermediaries in international business transactions: between make, buy and reform," European Journal of Law and Economics, Springer, vol. 35(3), pages 349-366, June.

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