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The Pitfalls of a Partially Honest Bureaucracy: Bribery, Inefficiency, and Bureaucratic Delay

Author

Listed:
  • Chris Ahlin

    () (Department of Economics, Vanderbilt University)

  • Pinaki Bose

    () (Department of Economics, Unviersity of Memphis)

Abstract

Bribery, it has been argued, allocates resources efficiently. We show that this conclusion need not hold in a dynamic extension of a simple static model in which it does. When permits are awarded over time and applicants can reapply, a partially honest bureaucracy results in inefficiency. This can take the form of both misallocation and bureaucratic delay, both of which are strategic maneuvers by dishonest bureaucrats to increase bribery income. Efficiency is a non-monotonic function of the fraction of bureaucrats that are honest. Consequently, small differences in monitoring costs may lead to very different optimal levels of corruption.

Suggested Citation

  • Chris Ahlin & Pinaki Bose, 2002. "The Pitfalls of a Partially Honest Bureaucracy: Bribery, Inefficiency, and Bureaucratic Delay," Vanderbilt University Department of Economics Working Papers 0224, Vanderbilt University Department of Economics.
  • Handle: RePEc:van:wpaper:0224
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    File URL: http://www.accessecon.com/pubs/VUECON/vu02-w24.pdf
    File Function: First version, 2002
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    More about this item

    Keywords

    Bribery; allocation efficiency; bureaucratic delay; corruption;

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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