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Corruption and competition for resources

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  • Bjorvatn, Kjetil

    (Dept. of Economics, Norwegian School of Economics and Business Administration)

  • Søreide, Tina

    (Dept. of Economics, Norwegian School of Economics and Business Administration)

Abstract

An increasing share of world FDI is carried out by multinationals from developing countries. These investors may have objectives and constraints that di¤er from their developed country counterparts. In this paper we focus on differences in attitudes to corruption, and how these may shape the competition for the right to extract resources in a developing country context. We show how di¤erences in the investors’ level of technology and differences in the host country government's trade-o¤ between bribes and taxes determine who wins the competition for the resource and the winning price. We …nd that the entry of a corrupt investor may induce the honest investor to offer bribes instead of taxes. Surprisingly, however, our analysis also demonstrates that under some conditions, the entry of a corrupt investor may in fact induce the honest investor to increase its tax payments.

Suggested Citation

  • Bjorvatn, Kjetil & Søreide, Tina, 2012. "Corruption and competition for resources," Discussion Paper Series in Economics 18/2012, Norwegian School of Economics, Department of Economics.
    • Handle: RePEc:hhs:nhheco:2012_018
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    References listed on IDEAS

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    Cited by:

    1. Tima T. Moldogaziev & Cheol Liu & Martin J. Luby, 2017. "Public Corruption in the U.S. States and Its Impact on Public Debt Pricing," Kyklos, Wiley Blackwell, vol. 70(2), pages 306-329, May.
    2. Bürgi Bonanomi, Elisabeth & Elsig, Manfred & Espa, Ilaria, 2015. "The Commodity Sector and Related Governance Challenges from a Sustainable Development Perspective: The Example of Switzerland Current Research Gaps," Papers 865, World Trade Institute.

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    More about this item

    Keywords

    Corruption; FDI; auction; natural resources.;
    All these keywords.

    JEL classification:

    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General

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