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Graft, Bribes, and the Practice of Corruption

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  • Juan D. Carrillo

Abstract

We construct a dynamic model of corruption in organizations where officials privately know their propensity for corruption and clients optimally choose the bribe offered. We show that there is a continuum set of stationary bribe equilibria due exclusively to the dynamic nature of the model and the endogenous determination of bribes. This can explain why similar countries have stable but different “implicit prices” for the same illegal services. We also show that, by not considering the reaction of clients, traditional analysis have systematically overestimated the beneficial effect of increasing wages as an anticorruption measure.

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  • Juan D. Carrillo, 2000. "Graft, Bribes, and the Practice of Corruption," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(3), pages 257-286, June.
    • Handle: RePEc:bla:jemstr:v:9:y:2000:i:3:p:257-286
    DOI: 10.1111/j.1430-9134.2000.00231.x-i1
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    1. Sah, Raaj K, 1991. "Social Osmosis and Patterns of Crime," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1272-1295, December.
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    3. Acemoglu, Daron & Verdier, Thierry, 1998. "Property Rights, Corruption and the Allocation of Talent: A General Equilibrium Approach," Economic Journal, Royal Economic Society, vol. 108(450), pages 1381-1403, September.
    4. Jean Tirole, 1996. "A Theory of Collective Reputations (with applications to the persistence of corruption and to firm quality)," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 63(1), pages 1-22.
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    Cited by:

    1. Michael Dietrich & Jolian McHardy & Abhijit Sharma, 2016. "Firm Corruption in the Presence of an Auditor," Review of Economic Analysis, Digital Initiatives at the University of Waterloo Library, vol. 8(2), pages 97-124, December.
    2. Raimundo Soto, 2003. "La Corrupción desde una Perspectiva Económica," Documentos de Trabajo 234, Instituto de Economia. Pontificia Universidad Católica de Chile..
    3. Fahad Khalil & Jacques Lawarrée & Sungho Yun, 2010. "Bribery versus extortion: allowing the lesser of two evils," RAND Journal of Economics, RAND Corporation, vol. 41(1), pages 179-198, March.
    4. Elvio Accinelli & Laura Policardo & Edgar J. Sánchez Carrera, 2012. "On the Dynamics and Effects of Corruption on Environmental Protection," Documentos de Trabajo (working papers) 1312, Department of Economics - dECON.
    5. Fahad Khalil & Jacques Lawarrée & Sungho Yun, 2007. "Bribery vs. Extortion: Allowing the Lesser of two Evils," CESifo Working Paper Series 1993, CESifo.
    6. Daniel Herold, 2017. "The Impact of Incentive Pay on Corporate Crime," MAGKS Papers on Economics 201752, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    7. Madelijne Gorsira & Adriaan Denkers & Wim Huisman, 2018. "Both Sides of the Coin: Motives for Corruption Among Public Officials and Business Employees," Journal of Business Ethics, Springer, vol. 151(1), pages 179-194, August.
    8. Brocas, Isabelle & Carrillo, Juan D., 2019. "A neuroeconomic theory of (dis) honesty," Journal of Economic Psychology, Elsevier, vol. 71(C), pages 4-12.
    9. Alexander Henke & Fahad Khalil & Jacques Lawarree, 2022. "Honest agents in a corrupt equilibrium," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(3), pages 762-783, August.

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