Tariffs, Quotas, and the Corrupt Purchasing of Inappropriate Technology
This paper develops a simple model where a manager of a firm in a Less-Developed Country (LDC) has the choice of whether or not to purchase an inappropriate technology in return for a bribe (kick-back) from the supplier of the technology. Provided that the manager achieves some minimum level of profit, the manager has a positive probability of not getting caught taking the bribe. The actual size of the bribe is determined by Nash axiomatic bargaining between the manager and the supplier. An interesting and not immediately obvious result is that, under certain circumstances, if the protective instrument is changed from a quota to an equivalent tariff the manager will switch from not acting corruptly to acting corruptly.
Volume (Year): 4 (2005)
Issue (Month): 1 (April)
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- Vousden,Neil, 1990. "The Economics of Trade Protection," Cambridge Books, Cambridge University Press, number 9780521346696, 1.
- James E. Anderson, 1988. "The Relative Inefficiency of Quotas," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262511789, June.
- Mauro, Paolo, 1998. "Corruption and the composition of government expenditure," Journal of Public Economics, Elsevier, vol. 69(2), pages 263-279, June.
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- Campbell, Neil, 1998. "Can We Believe in Cold Showers?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 13, pages 131-162.
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