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Bureaucratic Corruption: Efficiency Virtue or Distributive Vice?

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  • Kulshreshtha Pravin
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    Abstract

    Governments frequently allocate resources at low prices and on a first-come-first-served basis because of reasons of equity and a concern for the poor. However, bureaucrats who distribute these resources often take bribes. This paper develops a rigorous model to analyze the distributional, efficiency and public policy implications of bribery in such situations. It is shown that at low prices, the poor would choose to wait while the rich would pay the bribe to obtain the rationed commodity. If the good is in extreme short-supply, the bureaucrat would allocate all units to the rich and the poor would be excluded. Contrary to the assertion made in the corruption literature, bribery may not enhance allocative efficiency.

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    Paper provided by Indian Institute of Management Ahmedabad, Research and Publication Department in its series IIMA Working Papers with number WP2003-03-01.

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    Handle: RePEc:iim:iimawp:wp00070

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    1. Lui, Francis T, 1985. "An Equilibrium Queuing Model of Bribery," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 93(4), pages 760-81, August.
    2. Wade, Robert, 1984. "Irrigation reform in conditions of populist anarchy : An Indian case," Journal of Development Economics, Elsevier, vol. 14(3), pages 285-303, April.
    3. Alderman, Harold, 1987. "Allocation of goods through non-price mechanisms : Evidence on distribution by willingness to wait," Journal of Development Economics, Elsevier, vol. 25(1), pages 105-124, February.
    4. Polterovich, Victor, 1993. "Rationing, Queues, and Black Markets," Econometrica, Econometric Society, Econometric Society, vol. 61(1), pages 1-28, January.
    5. Andrei Shleifer & Robert Vishny, 1992. "Pervasive Shortages under Socialism," RAND Journal of Economics, The RAND Corporation, vol. 23(2), pages 237-246, Summer.
    6. Banerjee, Abhijit V, 1997. "A Theory of Misgovernance," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 112(4), pages 1289-1332, November.
    7. GABSZEWICZ, Jean J. & THISSE, Jacques-François, . "Price competition, quality and income disparities," CORE Discussion Papers RP -370, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    8. Nichols, D & Smolensky, E & Tideman, T N, 1971. "Discrimination by Waiting Time in Merit Goods," American Economic Review, American Economic Association, vol. 61(3), pages 312-23, June.
    9. Stahl, Dale II & Alexeev, Michael, 1985. "The influence of black markets on a queue-rationed centrally planned economy," Journal of Economic Theory, Elsevier, vol. 35(2), pages 234-250, August.
    10. Banerjee, A.V., 1997. "A Theory of Misgovernance," Working papers 97-4, Massachusetts Institute of Technology (MIT), Department of Economics.
    11. Sen, Amartya, 1983. "Poor, Relatively Speaking," Oxford Economic Papers, Oxford University Press, vol. 35(2), pages 153-69, July.
    12. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
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