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Tariffs, Quotas, and the Corrupt Purchasing of Inappropriate Technology

Author

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  • Neil Campbell

    (Department of Applied and International Economics, Massey University, New Zealand)

Abstract

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.

Suggested Citation

  • Neil Campbell, 2005. "Tariffs, Quotas, and the Corrupt Purchasing of Inappropriate Technology," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 4(1), pages 1-9, April.
    • Handle: RePEc:ijb:journl:v:4:y:2005:i:1:p:1-9
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    References listed on IDEAS

    as
    1. Stiglitz, Joseph E., 1988. "Economic organization, information, and development," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 5, pages 93-160, Elsevier.
    2. Campbell, Neil, 1998. "Can We Believe in Cold Showers?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 13, pages 131-162.
    3. James E. Anderson, 1988. "The Relative Inefficiency of Quotas," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262511789, December.
    4. Jeffry M. Netter & William L. Megginson, 2001. "From State to Market: A Survey of Empirical Studies on Privatization," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 321-389, June.
    5. Arvind K. Jain, 2001. "Corruption: A Review," Journal of Economic Surveys, Wiley Blackwell, vol. 15(1), pages 71-121, February.
    6. Vousden,Neil, 1990. "The Economics of Trade Protection," Cambridge Books, Cambridge University Press, number 9780521346696.
    7. 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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    More about this item

    Keywords

    kick-backs; corruption; managerial discretion; border protection;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

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