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Corrupt Relational Contracting

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Abstract

Because corruption must be hidden from the public and is not enforced by courts it entails transaction costs, which are larger than those from legal exchange. This suggests that corrupt contracts are primarily relational contracts where legal exchange serves as a basis for sealing and enforcing corrupt agreements. Legal exchange not only provides for corrupt opportunities, but for the necessary enforcement mechanisms. Examples of such legal exchange are long-term business exchange, belonging to the same firm or political party or being embedded in social relationships. The latter may even comprise the engagement in charitable institutions. Reform should not only focus on limiting opportunities for corrupt behavior but also on impeding the enforcement of corrupt agreements.

Suggested Citation

  • Johann Graf Lambsdorff & Sitki Utku Teksoz, 2002. "Corrupt Relational Contracting," Departmental Discussion Papers 113, University of Goettingen, Department of Economics.
  • Handle: RePEc:got:vwldps:113
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    File URL: http://www2.vwl.wiso.uni-goettingen.de/departmentpaper/NO_113.pdf
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    Cited by:

    1. Goel, Rajeev K. & Nelson, Michael A., 2010. "Causes of corruption: History, geography and government," Journal of Policy Modeling, Elsevier, vol. 32(4), pages 433-447, July.
    2. Graf Lambsdorff, Johann & Nell, Mathias, 2005. "Let them take gifts, and cheat those who seek influence," Passauer Diskussionspapiere, Volkswirtschaftliche Reihe V-41-05, University of Passau, Faculty of Business and Economics.
    3. repec:hhs:bofitp:2009_005 is not listed on IDEAS
    4. Rajeev Goel & Michael Nelson, 2011. "Government fragmentation versus fiscal decentralization and corruption," Public Choice, Springer, vol. 148(3), pages 471-490, September.
    5. repec:got:cegedp:59 is not listed on IDEAS
    6. Goel, Rajeev K. & Korhonen, Iikka, 2011. "Exports and cross-national corruption: A disaggregated examination," Economic Systems, Elsevier, vol. 35(1), pages 109-124, March.
    7. Salvatore Barbaro & Jens Südekum, 2004. "Reforming a complicated income tax system: The political economics perspective," Departmental Discussion Papers 120, University of Goettingen, Department of Economics.
    8. Nadia Fiorino & Emma Galli & Fabio Padovano, 2013. "Do fiscal decentralization and government fragmentation affect corruption in different ways? Evidence from a panel data analysis," Chapters,in: The Challenge of Local Government Size, chapter 5, pages 121-147 Edward Elgar Publishing.
    9. Petra Enß & Robert Schwager, 2006. "Kommunaler Finanzausgleich und Gewerbesteuerhebesätze in Niedersachsen," Departmental Discussion Papers 127, University of Goettingen, Department of Economics.
    10. Renate Ohr, 2009. "European Monetary Union at Ten: Had the German Maastricht Critics Been Wrong?," Departmental Discussion Papers 141, University of Goettingen, Department of Economics.
    11. Salvatore Barbaro, 2002. "The Distributional Impact of Subsidies to Higher Education - Empirical Evidence from Germany," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 59(4), pages 458-458, December.
    12. Corinna Ahlfeld, 2009. "The scapegoat of heterogeneity - How fragmentation influences political decisionmaking," Departmental Discussion Papers 143, University of Goettingen, Department of Economics.
    13. Salvatore Barbaro, 2003. "The Combined Effect of Taxation and Subsidization on Human Capital Investment," Departmental Discussion Papers 116, University of Goettingen, Department of Economics.
    14. Mathias Nell, 2009. "Contracts obtained by means of bribery: should they be void or valid?," European Journal of Law and Economics, Springer, vol. 27(2), pages 159-176, April.
    15. Ajit Mishra & Andrew Samuel, 2016. "Corruption and hold-up: the role of intermediaries," European Journal of Law and Economics, Springer, vol. 41(3), pages 575-599, June.
    16. Thies Büttner & Robert Schwager, 2003. "Regionale Verteilungseffekte der Hochschulfinanzierung und ihre Konsequenzen," Departmental Discussion Papers 119, University of Goettingen, Department of Economics.
    17. Lambsdorff, Johann & Nell, Mathias, 2007. "Fighting corruption with asymmetric penalties and leniency," Center for European, Governance and Economic Development Research Discussion Papers 59, University of Goettingen, Department of Economics.
    18. Goel, Rajeev K. & Herrala, Risto & Mazhar, Ummad, 2013. "Institutional quality and environmental pollution: MENA countries versus the rest of the world," Economic Systems, Elsevier, vol. 37(4), pages 508-521.
    19. Mikael Priks, 2012. "Competition among officials and the abuse of power," Public Choice, Springer, vol. 150(3), pages 425-438, March.
    20. Rajeev K. Goel, 2013. "Initiation of corrupt exchanges and severity of corruption," Financial Theory and Practice, Institute of Public Finance, vol. 37(2), pages 207-222.
    21. Sascha Wolff, 2006. "Migration und ihre Determinanten im ost-westdeutschen Kontext nach der Wiedervereinigung: Ein Literaturüberblick," Departmental Discussion Papers 130, University of Goettingen, Department of Economics.
    22. Goel, Rajeev K. & Nelson, Michael A., 2007. "Are corrupt acts contagious?: Evidence from the United States," Journal of Policy Modeling, Elsevier, vol. 29(6), pages 839-850.

    More about this item

    Keywords

    Corruption; Secrecy; Transaction costs; Opportunism; Reputation; Trust;

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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