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Corruption by Design: Bribery in Chinese Enterprise Licensing

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  • Manion, Melanie

Abstract

This article analyzes as a game a common form of corruption in Chinese bureaucracies: payment of bribes to officials for a standard good that is not in fixed supply and to which those paying bribes are, in principle, fully entitled. Formal structures and informal expectations have been identified through field research as features of "institutional design" that indicate an asymmetric information game. Bribery is derived as an equilibrium solution in the game. Exercises in comparative statics reveal the robustness of bribery when game parameter values are altered to reflect changes in institutional design. The exercises indicate that reducing corruption, in the sense of reducing bribe sizes, is relatively unproblematic. To move away entirely from corrupt equilibria, however, requires very substantial changes in institutional design and may not be feasible through changes in formal structures alone. Copyright 1996 by Oxford University Press.

Suggested Citation

  • Manion, Melanie, 1996. "Corruption by Design: Bribery in Chinese Enterprise Licensing," Journal of Law, Economics, and Organization, Oxford University Press, vol. 12(1), pages 167-195, April.
  • Handle: RePEc:oup:jleorg:v:12:y:1996:i:1:p:167-95
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    Cited by:

    1. Kobil Ruziev & Don Webber, 2017. "SMEs access to formal finance in post-communist economies: Do institutional structure and political connectedness matter?," Working Papers 20171701, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    2. repec:bla:stratm:v:38:y:2017:i:2:p:203-231 is not listed on IDEAS
    3. repec:eee:wdevel:v:98:y:2017:i:c:p:133-147 is not listed on IDEAS
    4. Sanyal, Amal & Gang, Ira N & Goswami, Omkar, 2000. "Corruption, Tax Evasion and the Laffer Curve," Public Choice, Springer, vol. 105(1-2), pages 61-78, October.
    5. Ram Mudambi & Pietro Navarra & Andrew Delios, 2013. "Government regulation, corruption, and FDI," Asia Pacific Journal of Management, Springer, vol. 30(2), pages 487-511, June.
    6. Carolyn M. Warner, 2002. "Creating a Common Market for Fraud and Corruption in the European Union: an Institutional Accident, or a Deliberate Strategy?," EUI-RSCAS Working Papers 31, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
    7. Abbink, Klaus, 2004. "Staff rotation as an anti-corruption policy: an experimental study," European Journal of Political Economy, Elsevier, vol. 20(4), pages 887-906, November.
    8. Duvanova, Dinissa, 2014. "Economic Regulations, Red Tape, and Bureaucratic Corruption in Post-Communist Economies," World Development, Elsevier, vol. 59(C), pages 298-312.
    9. Yang, David Da-hua, 2005. "Corruption by monopoly: Bribery in Chinese enterprise licensing as a repeated bargaining game," China Economic Review, Elsevier, vol. 16(2), pages 171-188.
    10. Bin Dong & Benno Torgler, 2010. "The Causes of Corruption: Evidence from China," Working Papers 2010.72, Fondazione Eni Enrico Mattei.
    11. Yiping Wu & Jiangnan Zhu, 2016. "When Are People Unhappy? Corruption Experience, Environment, and Life Satisfaction in Mainland China," Journal of Happiness Studies, Springer, vol. 17(3), pages 1125-1147, June.
    12. Luca Correani, 2004. "Corruzione burocratica e preferenze sociali: un modello interpretativo," Public Economics 0406008, EconWPA.
    13. Humphry Hung, 2008. "Normalized Collective Corruption in a Transitional Economy: Small Treasuries in Large Chinese Enterprises," Journal of Business Ethics, Springer, vol. 79(1), pages 69-83, April.
    14. Ren Li, 2013. "Media Corruption: A Chinese Characteristic," Journal of Business Ethics, Springer, vol. 116(2), pages 297-310, August.
    15. Bayar, Güzin, 2014. "Spurious middlemen in corrupt transactions," Economics Discussion Papers 2014-26, Kiel Institute for the World Economy (IfW).
    16. Klaus Abbink & Bernd Irlenbusch & Elke Renner, 2002. "An Experimental Bribery Game," Journal of Law, Economics, and Organization, Oxford University Press, vol. 18(2), pages 428-454, October.
    17. Ogus, Anthony, 2005. "Towards Appropriate Institutional Arrangements for Regulation in Less Developed Countries," Centre on Regulation and Competition (CRC) Working papers 30644, University of Manchester, Institute for Development Policy and Management (IDPM).
    18. Susan-Rose Ackerman, 1997. "Corruption, Infefficiency and Economic Growth," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 24, pages 3-20.
    19. Rajeev K Goel & Jelena Budak & Edo Rajh, 2013. "Bureaucratic Monopoly and the Nature and Timing of Bribes: Evidence from Croatian Data," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 55(1), pages 43-58, March.
    20. Rajeev K. Goel, 2013. "Initiation of corrupt exchanges and severity of corruption," Financial Theory and Practice, Institute of Public Finance, vol. 37(2), pages 207-222.
    21. Geoffrey Hodgson & Shuxia Jiang, 2008. "La economía de la corrupción y la corrupción de la economía: una perspectiva institucionalista," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 10(18), pages 55-80, January-J.
    22. Richard Damania & Erkan Yalcin, 2005. "Corruption and Political Competition," Microeconomics 0510012, EconWPA.

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