We study bureaucratic corruption in a model in which a constituency sets required levels for a given set of activities. Each activity is carried out by an external provider, and its realization is supervised by a bureaucrat. While bureaucrats are supposed to act on behalf of the constituency, they can decide to be corrupt and allow providers to deliver lower activity levels than contracted in exchange for a bribe. Given this, the constituency sets the optimal activity levels weighing off the value of activity levels, their costs, as well as the possibility for the bureaucrats to be corrupt. We use this setup to study the impact on equilibrium corruption of the degree of decentralization of corruption. To do this we compute equilibrium corruption in two different settings: 1) Each bureaucrat acts in such a way as to maximize his own individual utility (competitive corruption); 2) An illegal syndicate oversee the corruption decisions of the population of bureaucrats in such a way as to maximize total proceeds from corruption (organized corruption). We show that, since average corruption payoff is increasing in the activity levels set by the constituency, and since the latter responds to high levels of corruption by reducing required activity levels, in equilibrium the illegal syndicate acts in such a way as to restrain the total number of corrupt transactions, so that corruption is lower when it is organized than when it is competitive.
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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number
526.
Find related papers by JEL classification: C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games 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.:
Shleifer, Andrei & Vishny, Robert W, 1993.
"Corruption,"
The Quarterly Journal of Economics,
MIT Press, vol. 108(3), pages 599-617, August.
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Andrei Shleifer & Robert W. Vishny, 1993.
"Corruption,"
NBER Working Papers
4372, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
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