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Competition in Bureaucracy and Corruption

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  • Mikhail Drugov

Abstract

This paper studies the consequences of introducing competition between bureaucrats. Bureaucrats are supposed to grant licences to firms that satisfy certain requirements. Firms have to invest into satisfying these requirements. Some bureaucrats are corrupt, that is, they give the licence to any firm in exchange for a bribe. Some firms prefer to buy the licence rather than to invest and satisfy the requirements imposing negative externalities on the society. The competition regime is found to create more ex ante incentives for firms to invest while the monopoly regime is better at implementing ex post allocation, that is, distributing the licences given the firms` investment decisions. Additional results on the effects of intermediaries, staff rotation, punishments and endogenous entry to the bureaucracy are provided.

Suggested Citation

  • Mikhail Drugov, 2007. "Competition in Bureaucracy and Corruption," Economics Series Working Papers 369, University of Oxford, Department of Economics.
  • Handle: RePEc:oxf:wpaper:369
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    References listed on IDEAS

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    More about this item

    Keywords

    Corruption; Competition; Bureaucracy;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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