Red Tape and Corruption
We study the emergence and interaction of red tape and corruption in a principal-bureaucrat-agent hierarchy. The principal is to provide the agent with a unit of a good that involves externalities so that market mechanisms fail to achieve first best. Red tape partially solves the problem. While imposing a cost on the agent, red tape also produces information about the agent’s type. Therefore the socially optimal level of red tape is not trivial. It is hard, however, to implement the social optimum if the bureaucrat in charge of red tape is corrupt. We consider two types of corruption. First, the bureaucrat may extort bribes from the agent in exchange for reducing the amount of red tape. Second, the bureaucrat may take bribes to conceal the information produced through red tape. The former kind of corruption tends to reduce red tape, while the latter provides incentives for excessive red tape: the more red tape, the more likely the bureaucrat can get the bribes ex post. We show that the latter effect prevails, and the equilibrium level of red tape is always above the social optimum.
|Date of creation:||Jul 2003|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Simeon Djankov & Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 2002.
"The Regulation Of Entry,"
The Quarterly Journal of Economics,
MIT Press, vol. 117(1), pages 1-37, February.
- Djankov, Simeon & La Porta, Rafael & López-de-Silanes, Florencio & Shleifer, Andrei, 2001. "The Regulation of Entry," CEPR Discussion Papers 2953, C.E.P.R. Discussion Papers.
- Djankov, Simeon & La Porta, Rafael & Shleifer, Andrei & Lopez de Silanes, Florencio, 2001. "The regulation of entry," Policy Research Working Paper Series 2661, The World Bank.
- Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silanes & Andre Shleifer, 2000. "The Regulation of Entry," Harvard Institute of Economic Research Working Papers 1904, Harvard - Institute of Economic Research.
- Simeon Djankov & Rafael La Porta & Florencio LopezdeSilanes & Andrei Shleifer, 2000. "The Regulation of Entry," NBER Working Papers 7892, National Bureau of Economic Research, Inc.
- Simeon Djankov & Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer, . "The Regulation of Entry," Working Paper 19462, Harvard University OpenScholar.
- Djankov, Simeon & La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei, 2001. "The Regulation of Entry," Working Paper Series rwp01-015, Harvard University, John F. Kennedy School of Government.
- Tirole, Jean, 1986. "Hierarchies and Bureaucracies: On the Role of Collusion in Organizations," Journal of Law, Economics and Organization, Oxford University Press, vol. 2(2), pages 181-214, Fall.
- Jean-Jacques LAFFONT & Jean TIROLE, 1990.
"The Politics of Government Decision-Making : a Theory of Regulatory Capture,"
Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP)
9004, Université de Lausanne, Faculté des HEC, DEEP.
- Laffont, Jean-Jacques & Tirole, Jean, 1991. "The Politics of Government Decision-Making: A Theory of Regulatory Capture," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1089-127, November.
- Jean-Jacques Laffont & Jean Tirole, 1988. "The Politics of Government Decision-Making: A Theory of Regulatory Capture," Working papers 506, Massachusetts Institute of Technology (MIT), Department of Economics.
- Vito Tanzi, 1998. "Corruption Around the World; Causes, Consequences, Scope, and Cures," IMF Working Papers 98/63, International Monetary Fund.
- Banerjee, Abhijit V, 1997. "A Theory of Misgovernance," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1289-1332, November.
- Green, Jerry R & Laffont, Jean-Jacques, 1986. "Partially Verifiable Information and Mechanism Design," Review of Economic Studies, Wiley Blackwell, vol. 53(3), pages 447-56, July.
- Simon Johnson & John McMillan & Christopher Woodruff, 2000. "Entrepreneurs and the Ordering of Institutional Reform: Poland, Slovakia, Romania, Russia and Ukraine Compared," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(1), pages 1-36, March.
- Banerjee, A.V., 1997. "A Theory of Misgovernance," Working papers 97-4, Massachusetts Institute of Technology (MIT), Department of Economics.
- Brunetti, Aymo & Kisunko, Gregory & Weder, Beatrice, 1997. "Institutional obstacles to doing business : region-by-region results from a worldwide survey of the private sector," Policy Research Working Paper Series 1759, The World Bank.
- Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
- Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
- Acemoglu, D. & Verdier, T., 1997.
"The Choice between Market Failures and Corruption,"
DELTA Working Papers
97-06, DELTA (Ecole normale supérieure).
- Vito Tanzi, 1998. "Corruption Around the World: Causes, Consequences, Scope, and Cures," IMF Staff Papers, Palgrave Macmillan, vol. 45(4), pages 559-594, December.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:3972. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct address
If references are entirely missing, you can add them using this form.