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Strategic analysis of petty corruption: Entrepreneurs and bureaucrats

  • Ariane Lambert-Mogiliansky

    (PSE - Paris-Jourdan Sciences Economiques - CNRS - EHESS - École des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - École des Ponts ParisTech (ENPC))

  • Mukul Majumdar

    (Economics Department - Cornell University - Cornell University)

  • Roy Radner

    (Stern School of Business - New York University [New York])

This paper develops a game-theoretic model of "petty corruption" by government officials. Such corruption is widespread, especially (but not only) in developing and transition economies. The model goes beyond the previously published studies in the way it describes the structure of bureaucratic "tracks" and the information among the participants. Entrepreneurs apply, in sequence, to a "track" of two or more bureaucrats in a prescribed order for approval of their projects. Our first result establishes that in a one-shot situation no project ever gets approved. This result leads us to consider a repeated interaction setting. In that context we characterize in more detail the trigger-strategy equilibria that minimize the social loss due to the system of bribes, and those that maximize the expected total bribe income of the bureaucrats. The results are used to shed some light on two much advocated anti-corruption policies: the single window policy and rotation of bureaucrats.

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Paper provided by HAL in its series PSE Working Papers with number halshs-00590706.

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Date of creation: Nov 2005
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Handle: RePEc:hal:psewpa:halshs-00590706
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  1. Marjit, Sugata & Mukherjee, Vivekananda & Mukherjee, Arijit, 2000. "Harassment, corruption and tax policy," European Journal of Political Economy, Elsevier, vol. 16(1), pages 75-94, March.
  2. Lambert-Mogiliansky, Ariane & Majudar, Mukul & Radner, Roy, 2008. "Petty Corruption: A Game-Theoretic Approach," Working Papers 08-09, Cornell University, Center for Analytic Economics.
  3. Rose-Ackerman,Susan, 1999. "Corruption and Government," Cambridge Books, Cambridge University Press, number 9780521659123.
  4. Paolo Mauro, 1996. "The Effects of Corruptionon Growth, Investment, and Government Expenditure," IMF Working Papers 96/98, International Monetary Fund.
  5. Mookherjee, Dilip & Png, I P L, 1995. "Corruptible Law Enforcers: How Should They Be Compensated?," Economic Journal, Royal Economic Society, vol. 105(428), pages 145-59, January.
  6. Ariane Lambert-Mogiliansky & Mukul Majumdar & Roy Radner, 2005. "Strategic analysis of petty corruption: Entrepreneurs and bureaucrats," PSE Working Papers halshs-00590706, HAL.
  7. repec:oup:qjecon:v:117:y:2002:i:1:p:1-37 is not listed on IDEAS
  8. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
  9. Rose-Ackerman,Susan, 1999. "Corruption and Government," Cambridge Books, Cambridge University Press, number 9780521632935.
  10. Roberto Burguet & Yeon-Koo Che, 2004. "Competitive Procurement with Corruption," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 50-68, Spring.
  11. repec:oup:qjecon:v:110:y:1995:i:3:p:681-712 is not listed on IDEAS
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