The Ghost of Corruption
This paper features a continuum of firms that apply for a permit and randomly get matched with a potentially corrupt bureaucrat. Although firms have the reporting option, they prefer paying low enough bribes to avoid reporting costs. Hence, full-corruption is the unique equilibrium. Furthermore, the value of entry is always negative for the marginal firm. Hence, there will be no entry. If firms are offered sufficiently high rewards for reporting, corruption could be eliminated. However, a reward high enough to uproot corruption would lead to false accusations. Thus, rewarding could help reduce corruption, but only if the market is viable in its absence. The paper also argues that in the presence of corruption, the shadow economy and the official economy are complements. Similarly, formal punishment for corruption and the moral cost of corruption could complement each other.
Volume (Year): 7 (2007)
Issue (Month): 1 (August)
|Contact details of provider:|| Web page: http://www.degruyter.com|
|Order Information:||Web: http://www.degruyter.com/view/j/bejeap|
When requesting a correction, please mention this item's handle: RePEc:bpj:bejeap:v:7:y:2007:i:1:n:38. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla)
If references are entirely missing, you can add them using this form.