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The role of externalities in determining the average level of corruption in the production process

A model of corruption in the production process is built which is aimed at studying the problem of choosing the optimal scheme of punishment, taking into account the structure of given production relations, as well as the fixed budget assumption. Stable equilibria of the model are characterized, and the mechanism of a bureaucrat's decision-making process is described. The crucial role of strategic interactions among bureaucrats is emphasized. Then, the model is used to examine punishment schemes: to what degree should punishment schemes depend on the deviation from the verage level of corruption by a given agent. Normally, it is better for a policymaker to have a scheme which reacts sharply to the deviations.

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Paper provided by EERC Research Network, Russia and CIS in its series EERC Working Paper Series with number 2k/04e.

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Length: 63 pages
Date of creation: 05 Apr 2001
Date of revision:
Handle: RePEc:eer:wpalle:2k/04e
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  1. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680, December.
  2. Gary S. Becker, 1968. "Crime and Punishment: An Economic Approach," Journal of Political Economy, University of Chicago Press, vol. 76, pages 169.
  3. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
  4. Rose-Ackerman, Susan, 1975. "The economics of corruption," Journal of Public Economics, Elsevier, vol. 4(2), pages 187-203, February.
  5. Chander, Parkash & Wilde, Louis, 1992. "Corruption in tax administration," Journal of Public Economics, Elsevier, vol. 49(3), pages 333-349, December.
  6. Sah, Raaj K, 1991. "Social Osmosis and Patterns of Crime," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1272-95, December.
  7. Leonid Polishchuk & Alexei Savvateev, 2004. "Spontaneous (non)emergence of property rights," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 12(1), pages 103-127, 03.
  8. Sanchez, Isabel & Sobel, Joel, 1993. "Hierarchical design and enforcement of income tax policies," Journal of Public Economics, Elsevier, vol. 50(3), pages 345-369, March.
  9. Lui, Francis T., 1986. "A dynamic model of corruption deterrence," Journal of Public Economics, Elsevier, vol. 31(2), pages 215-236, November.
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