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Corruption

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  • Abhijit Banerjee
  • Sendhil Mullainathan
  • Rema Hanna

Abstract

In this paper, we provide a new framework for analyzing corruption in public bureaucracies. The standard way to model corruption is as an example of moral hazard, which then leads to a focus on better monitoring and stricter penalties with the eradication of corruption as the final goal. We propose an alternative approach which emphasizes why corruption arises in the first place. Corruption is modeled as a consequence of the interaction between the underlying task being performed by bureaucrat, the bureaucrat's private incentives and what the principal can observe and control. This allows us to study not just corruption but also other distortions that arise simultaneously with corruption, such as red-tape and ultimately, the quality and efficiency of the public services provided, and how these outcomes vary depending on the specific features of this task. We then review the growing empirical literature on corruption through this perspective and provide guidance for future empirical research.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17968.

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Date of creation: Apr 2012
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Publication status: published as “Corruption,” (with Rema Hanna and Sendhil Mullainathan), The Handbook of Organizational Economics. Ed. Robert Gibbons and John Roberts. Princeton University Press, 1109-­‐1147, 2012.
Handle: RePEc:nbr:nberwo:17968

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References

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Citations

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Cited by:
  1. Hathroubi, Salem, 2013. "Epidemic corruption: a bio-economic homology," EconStor Preprints, ZBW - German National Library of Economics 73558, ZBW - German National Library of Economics.
  2. Mikhail Drugov & John Hamman & Danila Serra, 2011. "Intermediaries in Corruption: An Experiment," Working Papers, Department of Economics, Florida State University wp2011_01_01, Department of Economics, Florida State University.
  3. Jiang, Ting & Nie, Huihua, 2014. "The stained China miracle: Corruption, regulation, and firm performance," Economics Letters, Elsevier, Elsevier, vol. 123(3), pages 366-369.
  4. Niehaus, Paul & Sukhtankar, Sandip, 2013. "The marginal rate of corruption in public programs: Evidence from India," Journal of Public Economics, Elsevier, Elsevier, vol. 104(C), pages 52-64.
  5. Lee, Wang-Sheng & Guven, Cahit, 2013. "Engaging in Corruption: The Influence of Cultural Values and Contagion Effects at the Micro Level," IZA Discussion Papers, Institute for the Study of Labor (IZA) 7685, Institute for the Study of Labor (IZA).
  6. Fredriksson, Anders, 2014. "Bureaucracy intermediaries, corruption and red tape," Journal of Development Economics, Elsevier, Elsevier, vol. 108(C), pages 256-273.

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