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http://hdl.handle.net/2451/26136
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| Title: | Strategic Analysis of Petty Corruption: Entrepreneurs and Bureaucrats |
| Authors: | Radner, Roy
Lambert-Mogiliansky, Ariane
Majumdar, Makul |
| Issue Date: | 7-Nov-2005 |
| Series/Report no.: | EC-04-22 |
| Abstract: | This paper develops a game-theoretic model of petty corruption by
government officials. Such corruption is widespread, especially (but not
only) in developing and transition economies. The model goes beyond the
previously published studies in the way it describes the structure of
bureaucratic tracks, and the information among the participants.
Entrepreneurs apply, in sequence, to a track of two or more
bureaucrats in a prescribed order for approval of their projects. Our
first result establishes that in a one-shot situation no project ever
gets approved. This result leads us to consider a repeated interaction
setting. In that context we characterize in more detail the
trigger-strategy equilibria that minimize the social loss due to the
system of bribes, and those that maximize the expected total bribe
income of the bureaucrats. The results are used to shed some light on
two much advocated anti-corruption policies: the single window policy
and rotation of bureaucrats. Corruption is found to be one of the most
damaging consequences of poor governance characterized by lack of both
transparency and accountability. Corruption lowers investment and
hinders economic growth and human development, by limiting access to
basic social services as well as increasing the cost of their delivery.
It also increases poverty, subverts the financial system, and undermines
the legitimacy of the state. Thus, corruption is anti-poor,
anti-development, anti-growth, anti-investment, and inequitable. The
cost of corruption to a nation is very high . |
| URI: | http://hdl.handle.net/2451/26136 |
| Appears in Collections: | Economics Working Papers
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