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How corruptible are you? Bribery under uncertainty

  • Dmitry Ryvkin

    ()

    (Department of Economics, Florida State University)

  • Danila Serra

    ()

    (Department of Economics, Florida State University)

We model corruption in a society as a result of bargaining for bribes between private citizens and public officials. We investigate the role that incomplete information with respect to the intrinsic moral cost of one's potential corruption partner plays out in his or her propensity to engage in bribery, and, consequently, the equilibrium level of corruption in the society. We assume that the cost of engaging in corruption is subject to strategic complementarities, which may lead to multiple corruption equilibria. We find that corruption is lowest when potential bribers and potential bribees are uncertain regarding each other's "corruptibility" and have asymmetric bargaining powers. Our uncertainty result provides theoretical support in favor of anti-corruption strategies, such as staff rotation in public offices, aimed at decreasing the social closeness of bribers and bribees. Our bargaining power result suggests that, under uncertainty, monopolistic public good provision has the same corruption-reducing effect as competitive public good provision.

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File URL: ftp://econpapers.fsu.edu/RePEc/fsu/wpaper/wp2010_09_01.pdf
File Function: First version, 2010-09
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Paper provided by Department of Economics, Florida State University in its series Working Papers with number wp2010_09_01.

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Length: 23 pages
Date of creation: Sep 2010
Date of revision:
Handle: RePEc:fsu:wpaper:wp2010_09_01
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  1. Svensson, Jakob, 2002. "Who Must Pay Bribes and How Much? Evidence from a cross-section of firms," Seminar Papers 713, Stockholm University, Institute for International Economic Studies.
  2. Esther Hauk & Maria Sáez, 1999. "On the cultural transmission of corruption," Economics Working Papers 392, Department of Economics and Business, Universitat Pompeu Fabra.
  3. Sanjeev Gupta, 1998. "Does Corruption Affect Income Inequality and Poverty?," IMF Working Papers 98/76, International Monetary Fund.
  4. Gary S. Becker, 1968. "Crime and Punishment: An Economic Approach," Journal of Political Economy, University of Chicago Press, vol. 76, pages 169.
  5. Toke S. Aidt, 2003. "Economic analysis of corruption: a survey," Economic Journal, Royal Economic Society, vol. 113(491), pages F632-F652, November.
  6. Lui, Francis T., 1986. "A dynamic model of corruption deterrence," Journal of Public Economics, Elsevier, vol. 31(2), pages 215-236, November.
  7. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
  8. Drugov, Mikhail, 2010. "Competition in bureaucracy and corruption," Journal of Development Economics, Elsevier, vol. 92(2), pages 107-114, July.
  9. Ritva Reinikka & Jakob Svensson, 2004. "Local Capture: Evidence From a Central Government Transfer Program in Uganda," The Quarterly Journal of Economics, MIT Press, vol. 119(2), pages 678-704, May.
  10. Roger B. Myerson & Mark A. Satterthwaite, 1981. "Efficient Mechanisms for Bilateral Trading," Discussion Papers 469S, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  11. Andvig, Jens Chr. & Moene, Karl Ove, 1990. "How corruption may corrupt," Journal of Economic Behavior & Organization, Elsevier, vol. 13(1), pages 63-76, January.
  12. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
  13. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
  14. Cadot, Olivier, 1987. "Corruption as a gamble," Journal of Public Economics, Elsevier, vol. 33(2), pages 223-244, July.
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