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Bribery, Reneging, and Competition Among Bureaucrats

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  • Soham Baksi
  • Pinaki Bose

Abstract

The paper examines the efficiency of competition among corrupt bureaucrats for the provision of a homogeneous public good, such as permits for projects. In an environment where bribe contracts suffer from enforcement problems, and bureaucrats have to expend effort to process applications and issue permits, a monopolist authority can be the more efficient form of bureaucratic organization compared to multiple competing bureaucrats. We argue that bribe transactions are covert and illegal, and not usually conducted as spot exchanges. Corrupt officials charge advance payments before processing applications, and sometimes renege on the delivery of permits. Incorporating these empirically-relevant features in a model with endogenous reneging by bureaucrats, we find that bureaucratic competition increases the incentive to renege on providing permits, thus lowering the number of productive enterprises in operation. While a monopolist bureaucrat charges a higher bribe, he also clears more projects. Consequently, social welfare can be higher in the absence of Bertrand competition among corrupt officials.

Suggested Citation

  • Soham Baksi & Pinaki Bose, 2023. "Bribery, Reneging, and Competition Among Bureaucrats," Departmental Working Papers 2023-01, The University of Winnipeg, Department of Economics.
    • Handle: RePEc:win:winwop:2023-01
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    File URL: http://economics.uwinnipeg.ca/RePEc/winwop/2023-01.pdf
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    References listed on IDEAS

    as
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    More about this item

    JEL classification:

    • 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
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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