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Does Competition Kill Corruption?

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  • Bliss, Christopher
  • Di Tella, Rafael

Abstract

Corrupt agents (officials or gangsters) exact money from firms. Corruption affects the number of firms in a free-entry equilibrium. The degree of deep competition in the economy increases with lower overhead costs relative to profits and with a tendency toward similar cost structures. Increases in competition may not lower corruption. The model explains why a rational corrupt agent may extinguish the source of his bribe income by causing a firm to exit. Assessing the welfare effect of corruption is complicated by the fact that exit caused by corruption does not necessarily reduce social welfare. Copyright 1997 by the University of Chicago.

Suggested Citation

  • Bliss, Christopher & Di Tella, Rafael, 1997. "Does Competition Kill Corruption?," Journal of Political Economy, University of Chicago Press, vol. 105(5), pages 1001-1023, October.
  • Handle: RePEc:ucp:jpolec:v:105:y:1997:i:5:p:1001-23
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    References listed on IDEAS

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    5. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, May.
    6. Krueger, Anne O, 1974. "The Political Economy of the Rent-Seeking Society," American Economic Review, American Economic Association, vol. 64(3), pages 291-303, June.
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