Helping‐Hand Corruption, Bribery Contests and Private‐Side Caused Persistent Corruption

This paper describes contests in which private agents bribe local government officials to give them a ‘helping hand’ through government policy. The model is similar to a rent‐seeking contest but bribes are transfers of income to government officials. The officials differ in ethics regarding their willingness to accept bribes. If the ethics of officials are known, the officials lose income from bribes because of their honesty. Other corrupt officials gain from the presence of honest officials. We show that bribery contests could generate long‐run equilibria where corruption is persistent. There are multiple long‐run equilibria and the specific one where the economy converges depends on the initial level of corruption. Furthermore, the equilibria that exist in the model can be Pareto ranked from the perspective of the bribers: the equilibrium without corruption is always Pareto efficient. We also show that for the government services/goods with the same value, a larger number of applicants leads to a higher equilibrium level of corruption.