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Competition in Bureaucracy and Corruption

Author

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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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    File URL: http://www.economics.ox.ac.uk/materials/working_papers/paper369.pdf
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    References listed on IDEAS

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    1. Rafael Di Tella & Alberto Ades, 1999. "Rents, Competition, and Corruption," American Economic Review, American Economic Association, pages 982-993.
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    Citations

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    Cited by:

    1. Roberto Burguet & Juan José Ganuza & José Garcia Montalvo, 2016. "The microeconomics of corruption. A review of thirty years of research," Economics Working Papers 1525, Department of Economics and Business, Universitat Pompeu Fabra.
    2. Dmitry Ryvkin & Danila Serra, 2015. "Is more competition always better? An experimental study of extortionary corruption," Working Papers wp2015_10_01, Department of Economics, Florida State University.
    3. Vivekananda Mukherjee & Panchali Banerjee, 2015. "Does Introduction of Bureaucratic Competition Reduce Corruption in Public Service Delivery?," Working Papers id:7217, eSocialSciences.
    4. Sergey V. Popov, 2015. "Decentralized Bribery and Market Participation," Scandinavian Journal of Economics, Wiley Blackwell, pages 108-125.
    5. Vivekananda Mukherjee & Panchali Banerjee, 2015. "Does Introduction of Bureaucratic Competition Reduce Corruption in Public Service Delivery?," Working Papers id:7217, eSocialSciences.
    6. Dmitry Ryvkin & Danila Serra, 2016. "The Industrial Organization of Corruption: Monopoly, Competition and Collusion," Working Papers wp2016_10_01, Department of Economics, Florida State University.
    7. Anna Kochanova, 2012. "The Impact of Bribery on Firm Performance: Evidence from Central and Eastern European Countries," CERGE-EI Working Papers wp473, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    8. André Seidel, 2015. "Compliance Costs, Corruption and the Differentiation of Bureaucratic Services," CESifo Working Paper Series 5683, CESifo Group Munich.
    9. Lamar Pierce & Jason Snyder, 2015. "Unethical Demand and Employee Turnover," Journal of Business Ethics, Springer, pages 853-869.
    10. Roy Cerqueti & Raffaella Coppier & Gustavo Piga, 2012. "Corruption, growth and ethnic fractionalization: a theoretical model," Journal of Economics, Springer, pages 153-181.
    11. Diaby, Aboubacar & Sylwester, Kevin, 2014. "Bureaucratic competition and public corruption: Evidence from transition countries," European Journal of Political Economy, Elsevier, vol. 35(C), pages 75-87.
    12. Sergey V. Popov, 2016. "On Basu's Proposal: Fines Affect Bribes," Economics Working Papers 16-04, Queen's Management School, Queen's University Belfast.
    13. Lamar Pierce & Michael W. Toffel, 2010. "The Role of Organizational Scope and Governance in Strengthening Private Monitoring," Harvard Business School Working Papers 11-004, Harvard Business School, revised Feb 2012.
    14. Ryvkin, Dmitry & Serra, Danila, 2012. "How corruptible are you? Bribery under uncertainty," Journal of Economic Behavior & Organization, Elsevier, vol. 81(2), pages 466-477.
    15. Roy Cerqueti & Raffaella Coppier & Gustavo Piga, 2012. "Corruption, growth and ethnic fractionalization: a theoretical model," Journal of Economics, Springer, pages 153-181.
    16. Victor Manuel Bennett & Lamar Pierce & Jason A. Snyder & Michael W. Toffel, 2012. "Competition and Illicit Quality," Harvard Business School Working Papers 12-071, Harvard Business School, revised May 2012.

    More about this item

    Keywords

    Corruption; Competition; Bureaucracy;

    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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