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Bureaucratic Corruption: Efficiency Virtue or Distributive Vice?

  • Kulshreshtha Pravin
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    Governments frequently allocate resources at low prices and on a first-come-first-served basis because of reasons of equity and a concern for the poor. However, bureaucrats who distribute these resources often take bribes. This paper develops a rigorous model to analyze the distributional, efficiency and public policy implications of bribery in such situations. It is shown that at low prices, the poor would choose to wait while the rich would pay the bribe to obtain the rationed commodity. If the good is in extreme short-supply, the bureaucrat would allocate all units to the rich and the poor would be excluded. Contrary to the assertion made in the corruption literature, bribery may not enhance allocative efficiency.

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    File URL: http://www.iima.ac.in/assets/snippets/workingpaperpdf/2003-03-01PraveenKulshreshtha.pdf
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    Paper provided by Indian Institute of Management Ahmedabad, Research and Publication Department in its series IIMA Working Papers with number WP2003-03-01.

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    Handle: RePEc:iim:iimawp:wp00070
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    1. Stahl, Dale II & Alexeev, Michael, 1985. "The influence of black markets on a queue-rationed centrally planned economy," Journal of Economic Theory, Elsevier, vol. 35(2), pages 234-250, August.
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    5. Jaskold Gabszewicz, J. & Thisse, J. -F., 1979. "Price competition, quality and income disparities," Journal of Economic Theory, Elsevier, vol. 20(3), pages 340-359, June.
    6. repec:cup:cbooks:9780521659123 is not listed on IDEAS
    7. Nichols, D & Smolensky, E & Tideman, T N, 1971. "Discrimination by Waiting Time in Merit Goods," American Economic Review, American Economic Association, vol. 61(3), pages 312-23, June.
    8. Abhijit V. Banerjee, 1997. "A Theory of Misgovernance," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1289-1332.
    9. Polterovich, Victor, 1993. "Rationing, Queues, and Black Markets," Econometrica, Econometric Society, vol. 61(1), pages 1-28, January.
    10. Lui, Francis T, 1985. "An Equilibrium Queuing Model of Bribery," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 760-81, August.
    11. Banerjee, A.V., 1997. "A Theory of Misgovernance," Working papers 97-4, Massachusetts Institute of Technology (MIT), Department of Economics.
    12. repec:cup:cbooks:9780521632935 is not listed on IDEAS
    13. Alderman, Harold, 1987. "Allocation of goods through non-price mechanisms : Evidence on distribution by willingness to wait," Journal of Development Economics, Elsevier, vol. 25(1), pages 105-124, February.
    14. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
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