IDEAS home Printed from https://ideas.repec.org/p/edn/esedps/131.html
   My bibliography  Save this paper

Corruption and Product Market Competition

Author

Abstract

It is generally considered that more competition might help curb corruption, as rents, which motivate corrupt agreements, are decreasing in the degree of competition. This paper proposes a framework to analyze the relationship between corruption and competition. It studies the optimal incentive scheme for potentially corrupt officials in charge of inspecting firms that compete in the product market. Given that bribe-taking is sometimes tolerated in equilibrium, for specific values of the externality that motivated regulatory intervention, nonmonotonic effects arise and more competition may lead to an increase in corruption. Moreover, it is shown that in this context competition is always welfare improving, even though it might lead to more corruption.

Suggested Citation

  • Stephane Straub, 2005. "Corruption and Product Market Competition," Edinburgh School of Economics Discussion Paper Series 131, Edinburgh School of Economics, University of Edinburgh.
    • Handle: RePEc:edn:esedps:131
    as

    Download full text from publisher

    File URL: http://www.econ.ed.ac.uk/papers/id131_esedps.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Mookherjee, Dilip & Png, I P L, 1995. "Corruptible Law Enforcers: How Should They Be Compensated?," Economic Journal, Royal Economic Society, vol. 105(428), pages 145-159, January.
    2. Bhagwati, Jagdish N, 1982. "Directly Unproductive, Profit-seeking (DUP) Activities," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 988-1002, October.
    3. Jean-Jacques Laffont & Jean Tirole, 1991. "The Politics of Government Decision-Making: A Theory of Regulatory Capture," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(4), pages 1089-1127.
    4. 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.
    5. Ades, Alberto & Di Tella, Rafael, 1997. "National Champions and Corruption: Some Unpleasant Interventionist Arithmetic," Economic Journal, Royal Economic Society, vol. 107(443), pages 1023-1042, July.
    6. Thierry Verdier & Daron Acemoglu, 2000. "The Choice between Market Failures and Corruption," American Economic Review, American Economic Association, vol. 90(1), pages 194-211, March.
    7. Laffont, Jean-Jacques & N'Guessan, Tchetche, 1999. "Competition and corruption in an agency relationship," Journal of Development Economics, Elsevier, vol. 60(2), pages 271-295, December.
    8. Rafael Di Tella & Alberto Ades, 1999. "Rents, Competition, and Corruption," American Economic Review, American Economic Association, vol. 89(4), pages 982-993, September.
    9. 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.
    10. Toke S. Aidt, 2003. "Economic analysis of corruption: a survey," Economic Journal, Royal Economic Society, vol. 113(491), pages 632-652, November.
    11. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
    12. Besley, Timothy & McLaren, John, 1993. "Taxes and Bribery: The Role of Wage Incentives," Economic Journal, Royal Economic Society, vol. 103(416), pages 119-141, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Indranil Dutta & Ajit Mishra, 2005. "Inequality, Corruption, and Competition in the Presence of Market Imperfections," WIDER Working Paper Series RP2005-46, World Institute for Development Economic Research (UNU-WIDER).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Stéphane Straub, 2009. "Regulatory Intervention, Corruption and Competition," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 35(1), pages 123-148, September.
    2. Drugov, Mikhail, 2010. "Competition in bureaucracy and corruption," Journal of Development Economics, Elsevier, vol. 92(2), pages 107-114, July.
    3. Cooter, Robert & Garoupa, Nuno, 2000. "The Virtuous Circle of Distrust: A Mechanism to Deter Bribes and Other Cooperative Crimes," Berkeley Olin Program in Law & Economics, Working Paper Series qt83c0k3wc, Berkeley Olin Program in Law & Economics.
    4. Indranil Dutta & Ajit Mishra, 2005. "Inequality, Corruption, and Competition in the Presence of Market Imperfections," WIDER Working Paper Series RP2005-46, World Institute for Development Economic Research (UNU-WIDER).
    5. Kira Boerner & Christa Hainz, 2007. "The Political Economy of Corruption & the Role of Financial Institutions," William Davidson Institute Working Papers Series wp892, William Davidson Institute at the University of Michigan.
    6. Foellmi, Reto & Oechslin, Manuel, 2007. "Who gains from non-collusive corruption?," Journal of Development Economics, Elsevier, vol. 82(1), pages 95-119, January.
    7. Blackburn, Keith & Forgues-Puccio, Gonzalo F., 2007. "Distribution and development in a model of misgovernance," European Economic Review, Elsevier, vol. 51(6), pages 1534-1563, August.
    8. Clarke, George R. G. & Xu, Lixin Colin, 2004. "Privatization, competition, and corruption: how characteristics of bribe takers and payers affect bribes to utilities," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 2067-2097, August.
    9. Van Rijckeghem, Caroline & Weder, Beatrice, 2001. "Bureaucratic corruption and the rate of temptation: do wages in the civil service affect corruption, and by how much?," Journal of Development Economics, Elsevier, vol. 65(2), pages 307-331, August.
    10. Miguel Braun & Rafael Di tella, 2004. "Inflation, Inflation Variability, and Corruption," Economics and Politics, Wiley Blackwell, vol. 16(1), pages 77-100, March.
    11. Frédéric Boehm, 2005. "Corrupción y captura en la regulación de los servicios públicos," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 7(13), pages 245-263, July-Dece.
    12. Olivier Armantier & Amadou Boly, 2008. "Can Corruption Be Studied in the Lab? Comparing a Field and a Lab Experiment," CIRANO Working Papers 2008s-26, CIRANO.
    13. Nicolas Jacquemet, 2005. "La corruption comme une imbrication de contrats : Une revue de la littérature microéconomique," Working Papers 2005-29, Center for Research in Economics and Statistics.
    14. Auriol, Emmanuelle & Straub, Stéphane & Flochel, Thomas, 2016. "Public Procurement and Rent-Seeking: The Case of Paraguay," World Development, Elsevier, vol. 77(C), pages 395-407.
    15. Wolfgang Maennig, 2004. "Korruption im internationalen Sport: ökonomische Analyse und Lösungsansätze," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 73(2), pages 263-291.
    16. Amadou Amadou Boly & Kole Keita & Assi Okara & Guei Guei C. Okou, 2021. "Effect of corruption on educational quantity and quality : theory and evidence," CERDI Working papers hal-03194726, HAL.
    17. Stéphane Straub, 2000. "Factores determinantes empíricos de las buenas instituciones: ¿sabemos algo a ciencia cierta?," Research Department Publications 4216, Inter-American Development Bank, Research Department.
    18. Keith Blackburn & Gonzalo F. Forgues-Puccio, 2011. "Foreign aid - a fillip for development or a fuel for corruption?," Centre for Growth and Business Cycle Research Discussion Paper Series 158, Economics, The University of Manchester.
    19. Wolfgang Maennig, 2002. "On the Economics of Doping and Corruption in International Sports," Journal of Sports Economics, , vol. 3(1), pages 61-89, February.
    20. Indranil Dutta & Ajit Mishra, 2003. "Corruption and Competition in the Presence of Inequality and Market Imperfections," Dundee Discussion Papers in Economics 152, Economic Studies, University of Dundee.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:edn:esedps:131. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Research Office (email available below). General contact details of provider: https://edirc.repec.org/data/deediuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.