A Search-Theoretic Model of Bureaucracy and Corruption
We analyze bureaucracy and corruption in a market with decentralized exchange and lemons. Exchange is modelled as a sequence of bilateral, random matches. Agents have private information about the quality of goods they produce and can supplement trade with socially inefficient bribes. Bureaucracy is modelled as a group of agents similar to private agents, but who enjoy centralized production and consumption. Transaction patterns between the bureaucracy and the private sector are fully endogenous. Our main finding is that centralized production and consumption in the bureaucracy also gives rise to low power incentives for the individual bureaucrats. As a result, we find conditions under which private agents bribe bureaucrats, while they do not bribe each other. An equilibrium with corruption and an equilibrium without corruption can co-exist. We discuss some welfare implications of the model.
|Date of creation:||11 Jul 2003|
|Contact details of provider:|| Postal: 150 St. George Street, Toronto, Ontario|
Phone: (416) 978-5283
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Williamson, Steve & Wright, Randall, 1994.
"Barter and Monetary Exchange under Private Information,"
American Economic Review,
American Economic Association, vol. 84(1), pages 104-123, March.
- Stephen D. Williamson & Randall Wright, 1991. "Barter and monetary exchange under private information," Staff Report 141, Federal Reserve Bank of Minneapolis.
- Williamson, S. & Wright, R., 1991. "Barter and Monetary Exchange Under Private Information," University of Western Ontario, The Centre for the Study of International Economic Relations Working Papers 9107, University of Western Ontario, The Centre for the Study of International Economic Relations.
- Kiyotaki, Nobuhiro & Wright, Randall, 1989. "On Money as a Medium of Exchange," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 927-954, August.
- repec:cup:cbooks:9780521659123 is not listed on IDEAS
- Thierry Verdier & Daron Acemoglu, 2000. "The Choice between Market Failures and Corruption," American Economic Review, American Economic Association, vol. 90(1), pages 194-211, March.
- Acemoglu, D. & Verdier, T., 1997. "The Choice between Market Failures and Corruption," DELTA Working Papers 97-06, DELTA (Ecole normale supérieure).
- Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1993. "Why Is Rent-Seeking So Costly to Growth?," American Economic Review, American Economic Association, vol. 83(2), pages 409-414, May.
- Li, Yiting & Wright, Randall, 1998. "Government Transaction Policy, Media of Exchange, and Prices," Journal of Economic Theory, Elsevier, vol. 81(2), pages 290-313, August.
- Cadot, Olivier, 1987. "Corruption as a gamble," Journal of Public Economics, Elsevier, vol. 33(2), pages 223-244, July.
- Lui, Francis T., 1986. "A dynamic model of corruption deterrence," Journal of Public Economics, Elsevier, vol. 31(2), pages 215-236, November.
- Engineer, Merwan & Shouying Shi, 1998. "Asymmetry, imperfectly transferable utility, and the role of fiat money in improving terms of trade," Journal of Monetary Economics, Elsevier, vol. 41(1), pages 153-183, February.
- Lui, Francis T, 1985. "An Equilibrium Queuing Model of Bribery," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 760-781, August.
- George A. Akerlof, 1970. "The Market for "Lemons": Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, Oxford University Press, vol. 84(3), pages 488-500.
- repec:cup:cbooks:9780521632935 is not listed on IDEAS Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:tor:tecipa:shouyong-03-02. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (RePEc Maintainer)
If references are entirely missing, you can add them using this form.