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Intermediation in corruption markets

Author

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  • Gautam Bose
  • Shubhashis Gangopadhyay

Abstract

Purpose - Consider a government benefit that is earmarked for a group of people “deserving” the benefit. Corruption happens when undeserving candidates obtain the benefit with the help of corrupt officials. Often, such corrupt activities are mediated by professional touts who act as intermediaries between the undeserving candidates and the corrupt officials. The purpose of this paper is to analyze the equilibrium in such an intermediated market. Design/methodology/approach - A queuing model was theoretically analyzed where candidates wait in line to obtain the benefit. Undeserving candidates can also obtain the service – in exchange for a bribe – if they happen to wait at a counter with a corrupt clerk. The intermediary collects information to find out which clerks are corrupt, and charges a fee to direct candidates to an honest or corrupt clerk, as the candidate may choose. Findings - In a market with a single intermediary we show that, under fairly general conditions: the intermediary is active; both deserving and undeserving candidates use the service of the intermediary; welfare in an economy with an intermediary is lower than that in an economy without intermediaries; and under some conditions, an optimal response to corruption is to reduce the number of officials dispensing the benefit. Originality/value - This paper provides a framework within which intermediated markets for corruption can be analysed. The framework is easy to adapt and can accommodate social costs other than waiting costs. The conclusion suggests more complex scenarios that may be analysed using the approach in this model.

Suggested Citation

  • Gautam Bose & Shubhashis Gangopadhyay, 2009. "Intermediation in corruption markets," Indian Growth and Development Review, Emerald Group Publishing, vol. 2(1), pages 39-55, April.
  • Handle: RePEc:eme:igdrpp:v:2:y:2009:i:1:p:39-55
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    Citations

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    Cited by:

    1. Ajit Mishra & Andrew Samuel, 2016. "Corruption and hold-up: the role of intermediaries," European Journal of Law and Economics, Springer, vol. 41(3), pages 575-599, June.
    2. Fredriksson, Anders, 2014. "Bureaucracy intermediaries, corruption and red tape," Journal of Development Economics, Elsevier, vol. 108(C), pages 256-273.
    3. Malay Biswas, 2017. "Are They Efficient in the Middle? Using Propensity Score Estimation for Modeling Middlemen in Indian Corporate Corruption," Journal of Business Ethics, Springer, vol. 141(3), pages 563-586, March.
    4. Charles Angelucci & Antonio Russo, 2015. "Petty corruption and citizen feedback," Working Papers 2015/25, Institut d'Economia de Barcelona (IEB).
    5. Gil S. Epstein & Ira N. Gang, 2010. "Why Pay Taxes When No One Else Does?," Review of Development Economics, Wiley Blackwell, vol. 14(2), pages 374-385, May.
    6. Amrita Dillon & PRANAB BARDHAN, 2015. "Corruption and Development Policy (Drawing Upon the Recent Indian Debate)," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(4), pages 472-479, August.
    7. Charles Angelucci & Antonio Russo, 2015. "Petty Corruption and Citizen Reports," CESifo Working Paper Series 5528, CESifo Group Munich.
    8. Mikhail Drugov & John Hamman & Danila Serra, 2014. "Intermediaries in corruption: an experiment," Experimental Economics, Springer;Economic Science Association, vol. 17(1), pages 78-99, March.
    9. Chaudhuri, Sarbajit & Mandal, Biswajit, 2012. "Bureaucratic reform, informal sector and welfare," MPRA Paper 36072, University Library of Munich, Germany.

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