Corruption and Bureaucratic Structure in a Developing Economy
AbstractWe address the impact of corruption in a developing economy in the context of an empirically relevant hold-up problem - when a foreign firm sinks an investment to provide infrastructure services. We focus on the structure of the economy’s bureaucracy, which can be centralized or decentralized, and characterize the ‘corruptibility’ of bureaucrats in each case. Results are explained in terms of the non-internalization, under decentralization, of the ‘bribe externality’ and the ‘price externality.’ In welfare terms, decentralization is favoured, relatively speaking, if the tax system is less inefficient, funding is less tight, bureaucrats are less venal, or compensation for expropriation is ungenerous.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2156.
Length: 43 pages
Date of creation: Jun 2006
Date of revision:
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Other versions of this item:
- John Bennett & Saul Estrin, 2006. "Corruption and Bureaucratic Structure in a Developing Economy," Economics and Finance Discussion Papers 06-07, Economics and Finance Section, School of Social Sciences, Brunel University.
- JOhn Bennett & Saul Estrin, 2006. "Corruption and Bureaucratic Structure in a Developing Economy," William Davidson Institute Working Papers Series 825, William Davidson Institute at the University of Michigan.
- D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
- H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-06-24 (All new papers)
- NEP-CDM-2006-06-24 (Collective Decision-Making)
- NEP-DEV-2006-06-24 (Development)
- NEP-PBE-2006-06-24 (Public Economics)
- NEP-REG-2006-06-24 (Regulation)
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