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Competition in Bureaucracy and Corruption

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Author Info
Mikhail Drugov
Abstract

This paper studies the consequences of introducing competition between bureaucrats. Bureaucrats are supposed to grant licences to firms that satisfy certain requirements. Firms have to invest into satisfying these requirements. Some bureaucrats are corrupt, that is, they give the licence to any firm in exchange for a bribe. Some firms prefer to buy the licence rather than to invest and satisfy the requirements imposing negative externalities on the society. The competition regime is found to create more ex ante incentives for firms to invest while the monopoly regime is better at implementing ex post allocation, that is, distributing the licences given the firms` investment decisions. Additional results on the effects of intermediaries, staff rotation, punishments and endogenous entry to the bureaucracy are provided.

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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 369.

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Date of creation: 2007
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Handle: RePEc:oxf:wpaper:369

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Related research
Keywords: Corruption Competition Bureaucracy

Find related papers by JEL classification:
D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Cadot, Olivier, 1987. "Corruption as a gamble," Journal of Public Economics, Elsevier, vol. 33(2), pages 223-244, July. [Downloadable!] (restricted)
  2. Alberto Ades & Rafael Di Tella, 1999. "Rents, Competition, and Corruption," American Economic Review, American Economic Association, vol. 89(4), pages 982-993, September. [Downloadable!] (restricted)
  3. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September. [Downloadable!] (restricted)
  4. Daron Acemoglu & Thierry Verdier, 2000. "The Choice between Market Failures and Corruption," American Economic Review, American Economic Association, vol. 90(1), pages 194-211, March. [Downloadable!] (restricted)
    Other versions:
  5. Mookherjee, Dilip & Png, I P L, 1995. "Corruptible Law Enforcers: How Should They Be Compensated?," Economic Journal, Royal Economic Society, vol. 105(428), pages 145-59, January. [Downloadable!] (restricted)
  6. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August. [Downloadable!] (restricted)
  7. Laffont, Jean-Jacques & N'Guessan, Tchetche, 1999. "Competition and corruption in an agency relationship," Journal of Development Economics, Elsevier, vol. 60(2), pages 271-295, December. [Downloadable!] (restricted)
  8. Saha, Bibhas, 2001. "Red tape, incentive bribe and the provision of subsidy," Journal of Development Economics, Elsevier, vol. 65(1), pages 113-133, June. [Downloadable!] (restricted)
  9. Guriev, Sergei, 2004. "Red tape and corruption," Journal of Development Economics, Elsevier, vol. 73(2), pages 489-504, April. [Downloadable!] (restricted)
    Other versions:
  10. Banerjee, A.V., 1997. "A Theory of Misgovernance," Working papers 97-4, Massachusetts Institute of Technology (MIT), Department of Economics.
  11. Ken Binmore & Ariel Rubinstein & Asher Wolinsky, 1986. "The Nash Bargaining Solution in Economic Modelling," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 176-188, Summer. [Downloadable!] (restricted)
  12. Bliss, Christopher & Di Tella, Rafael, 1997. "Does Competition Kill Corruption?," Journal of Political Economy, University of Chicago Press, vol. 105(5), pages 1001-23, October.
  13. Banerjee, Abhijit V, 1997. "A Theory of Misgovernance," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1289-1332, November.
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