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Bureaucracy Intermediaries, Corruption and Red Tape

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  • Anders Fredriksson

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    (Center for Research in the Economics of Development, University of Namur)

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    Abstract

    Intermediaries helping individuals and rms with the government bureaucracy are common in developing countries. Although such bureaucracy intermediaries are, anecdotally,linked with corruption and welfare losses, few formal analyses exist. In our model, a government license can bene t individuals. We study individuals net gain when acquiring the license through the regular procedure, through bribing or through intermediaries. For a given procedure, individuals using intermediaries are better offthan if intermediaries and corruption had not existed. Intermediaries grease the wheels. We then study incentives of corrupt bureaucrats to create red tape. When free to choose levels of red tape, bureaucrats implement more red tape and individuals are unambiguously worse off in a setting with intermediaries than with direct corruption only. Intermediaries can thus improve access to the bureaucracy, but also strengthen incentives to create red tape - a potential explanation ! why license procedures tend to be long in developing countries.

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    File URL: http://www.fundp.ac.be/eco/economie/recherche/wpseries/wp/1202.pdf
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    Bibliographic Info

    Paper provided by University of Namur, Department of Economics in its series Working Papers with number 1202.

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    Length: 37 pages
    Date of creation: Mar 2013
    Date of revision:
    Handle: RePEc:nam:wpaper:1202

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    Keywords: Bureaucracy; Corruption; Intermediaries; Red tape;

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    1. Hasker, Kevin & Okten, Cagla, 2008. "Intermediaries and corruption," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 67(1), pages 103-115, July.
    2. Simeon Djankov & Rafael La Porta & Florencio LopezdeSilanes & Andrei Shleifer, 2000. "The Regulation of Entry," NBER Working Papers 7892, National Bureau of Economic Research, Inc.
    3. 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.
    4. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, . "The Quality of Government," Working Paper 19452, Harvard University OpenScholar.
    5. Vito Tanzi, 1998. "Corruption Around the World: Causes, Consequences, Scope, and Cures," IMF Staff Papers, Palgrave Macmillan, vol. 45(4), pages 559-594, December.
    6. Gautam Bose & Shubhashis Gangopadhyay, 2009. "Intermediation in corruption markets," Indian Growth and Development Review, Emerald Group Publishing, Emerald Group Publishing, vol. 2(1), pages 39-55, April.
    7. Odd-Helge Fjeldstad, 2002. "Fighting fiscal corruption: The case of the Tanzania Revenue Authority," CMI Working Papers, CMI (Chr. Michelsen Institute), Bergen, Norway WP 2002:3, CMI (Chr. Michelsen Institute), Bergen, Norway.
    8. Lambsdorff, Johann Graf, 2002. "Making corrupt deals: contracting in the shadow of the law," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 48(3), pages 221-241, July.
    9. Stone, Andrew & Levy, Brian & Paredes, Ricardo, 1992. "Public institutions and private transactions : the legal and regulatory environment for business private transactions in Brazil and Chile," Policy Research Working Paper Series 891, The World Bank.
    10. Vito Tanzi, 1998. "Corruption Around the World," IMF Working Papers 98/63, International Monetary Fund.
    11. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 35(3), pages 1320-1346, September.
    12. Jakob Svensson, 2005. "Eight Questions about Corruption," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 19(3), pages 19-42, Summer.
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