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Graft, bribes, and the practice of corruption

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  • Juan Carrillo

Abstract

We construct a dynamic model of corruption in organizations where officials privately know their propensity for corruption and clients optimally choose the bribe offered. We show that there is a continuum set of stationary bribe equilibria due exclusively to the dynamic nature of the model and the endogenous determination of bribes. This can explain why similar countries have stable but different "implicit prices " for the same illegal services. We also show that, by not considering the reaction of clients, traditional analysis have systematically overestimated the beneficial effect of increasing wages as an anticorruption measure.

Suggested Citation

  • Juan Carrillo, 2000. "Graft, bribes, and the practice of corruption," ULB Institutional Repository 2013/167083, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:ulb:ulbeco:2013/167083
    Note: SCOPUS: ar.j
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    Cited by:

    1. Daniel Herold, 2017. "The Impact of Incentive Pay on Corporate Crime," MAGKS Papers on Economics 201752, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    2. Alexander Henke & Fahad Khalil & Jacques Lawarree, 2022. "Honest agents in a corrupt equilibrium," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(3), pages 762-783, August.
    3. Fahad Khalil & Jacques Lawarrée & Sungho Yun, 2007. "Bribery vs. Extortion: Allowing the Lesser of two Evils," CESifo Working Paper Series 1993, CESifo.
    4. Michael Dietrich & Jolian McHardy & Abhijit Sharma, 2016. "Firm Corruption in the Presence of an Auditor," Review of Economic Analysis, Digital Initiatives at the University of Waterloo Library, vol. 8(2), pages 97-124, December.
    5. Fahad Khalil & Jacques Lawarrée & Sungho Yun, 2010. "Bribery versus extortion: allowing the lesser of two evils," RAND Journal of Economics, RAND Corporation, vol. 41(1), pages 179-198, March.
    6. Madelijne Gorsira & Adriaan Denkers & Wim Huisman, 2018. "Both Sides of the Coin: Motives for Corruption Among Public Officials and Business Employees," Journal of Business Ethics, Springer, vol. 151(1), pages 179-194, August.
    7. Brocas, Isabelle & Carrillo, Juan D., 2019. "A neuroeconomic theory of (dis) honesty," Journal of Economic Psychology, Elsevier, vol. 71(C), pages 4-12.
    8. Raimundo Soto, 2003. "La Corrupción desde una Perspectiva Económica," Documentos de Trabajo 234, Instituto de Economia. Pontificia Universidad Católica de Chile..

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