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Corruption and Decentralization

  • Emanuela Carbonara
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    This paper studies the effect of decentralization on corruption in a hierarchical organization, where decentralization is intended as the delegation of control power to lower levels in a hierarchy. Decentralization causes a loss in control to the higher levels, thus curbing their incentives to monitor and detect corrupt activities. However, it also lowers the expected gains from corruption as, following decentralization, the number of individuals who are in charge of a single decision is reduced. It is then more likely that corrupt agents are called to bear the consequences of their actions. Hence, decentralization, although creating agency problems inside an organization, can help in controlling corruption.

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    File URL: https://amsacta.unibo.it/4967/1/342.pdf
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    Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number 342.

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    Date of creation: Jan 1998
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    Handle: RePEc:bol:bodewp:342
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    1. Mike Burkart & Denis Gromb & Fausto Panunzi, 1997. "Large Shareholders, Monitoring, and the Value of the Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 112(3), pages 693-728.
    2. Sah, Raaj Kumar & Stiglitz, Joseph E, 1986. "The Architecture of Economic Systems: Hierarchies and Polyarchies," American Economic Review, American Economic Association, vol. 76(4), pages 716-27, September.
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