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Corruption and competition for resources

  • Bjorvatn, Kjetil

    ()

    (Dept. of Economics, Norwegian School of Economics and Business Administration)

  • Søreide, Tina

    ()

    (Dept. of Economics, Norwegian School of Economics and Business Administration)

An increasing share of world FDI is carried out by multinationals from developing countries. These investors may have objectives and constraints that di¤er from their developed country counterparts. In this paper we focus on differences in attitudes to corruption, and how these may shape the competition for the right to extract resources in a developing country context. We show how di¤erences in the investors’ level of technology and differences in the host country government's trade-o¤ between bribes and taxes determine who wins the competition for the resource and the winning price. We …nd that the entry of a corrupt investor may induce the honest investor to offer bribes instead of taxes. Surprisingly, however, our analysis also demonstrates that under some conditions, the entry of a corrupt investor may in fact induce the honest investor to increase its tax payments.

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Paper provided by Department of Economics, Norwegian School of Economics in its series Discussion Paper Series in Economics with number 18/2012.

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Length: 17 pages
Date of creation: 14 Sep 2012
Date of revision:
Handle: RePEc:hhs:nhheco:2012_018
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  1. Roberto Burguet & Yeon-Koo Che, 2004. "Competitive Procurement with Corruption," RAND Journal of Economics, The RAND Corporation, vol. 35(1), pages 50-68, Spring.
  2. Fibich, Gadi & Gavious, Arieh & Sela, Aner, 2004. "Revenue equivalence in asymmetric auctions," Journal of Economic Theory, Elsevier, vol. 115(2), pages 309-321, April.
  3. Busse, Matthias & Gröning, Steffen, 2011. "The resource curse revisited: Governance and natural resources," HWWI Research Papers 106, Hamburg Institute of International Economics (HWWI).
  4. Pomfret, Richard, 2012. "Resource management and transition in Central Asia, Azerbaijan and Mongolia," Journal of Asian Economics, Elsevier, vol. 23(2), pages 146-156.
  5. Kolstad, Ivar & Søreide, Tina, 2009. "Corruption in natural resource management: Implications for policy makers," Resources Policy, Elsevier, vol. 34(4), pages 214-226, December.
  6. Robinson, James A & Torvik, Ragnar & Verdier, Thierry, 2002. "Political Foundations of the Resource Curse," CEPR Discussion Papers 3422, C.E.P.R. Discussion Papers.
  7. Aidt, T.S., 2009. "Corruption, Institutions and Economic Development," Cambridge Working Papers in Economics 0918, Faculty of Economics, University of Cambridge.
  8. Brunnschweiler, Christa N., 2008. "Cursing the Blessings? Natural Resource Abundance, Institutions, and Economic Growth," World Development, Elsevier, vol. 36(3), pages 399-419, March.
  9. Ivar Kolstad & Arne Wiig, 2009. "What determines Chinese outward FDI?," CMI Working Papers 3, CMI (Chr. Michelsen Institute), Bergen, Norway.
  10. Milgrom, Paul, 1989. "Auctions and Bidding: A Primer," Journal of Economic Perspectives, American Economic Association, vol. 3(3), pages 3-22, Summer.
  11. Christoph Engel & Sebastian Goerg & Gaoneng Yu, 2012. "Symmetric vs. Asymmetric Punishment Regimes for Bribery," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2012_01, Max Planck Institute for Research on Collective Goods, revised May 2013.
  12. Bjorvatn, Kjetil & Soreide, Tina, 2005. "Corruption and privatization," European Journal of Political Economy, Elsevier, vol. 21(4), pages 903-914, December.
  13. Jakob Svensson, 2005. "Eight Questions about Corruption," Journal of Economic Perspectives, American Economic Association, vol. 19(3), pages 19-42, Summer.
  14. Eoin McGuirk, 2013. "The illusory leader: natural resources, taxation and accountability," Public Choice, Springer, vol. 154(3), pages 285-313, March.
  15. Asiedu, Elizabeth & Lien, Donald, 2011. "Democracy, foreign direct investment and natural resources," Journal of International Economics, Elsevier, vol. 84(1), pages 99-111, May.
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