Abstract: examples of using public office for personal gain. The example of the first kind of bribery can be taking a bribe for overlooking the hazardous working conditions on a factory. The example of the second kind of bribery can be gouging the bribe by threatening to stop the factory due to nonexistent violations. The first kind of bribery can be prosecuted ex-post, and it’s clearly detrimental to the welfare of the economy. The second kind of bribery is simply a transfer, and is therefore perceived as innocuous, but this transfer has significant economic implications. I concentrate on the second kind of bribery in this study, and I will call it “transfer bribery” for brevity. This paper proposes a model of bribery that does not require the existence of centralized government. The critical difference of corruption from any other endeavour is that it is principally impossible to cooperate in bribery on a significant scale. I find that decentralized bribery increases the expected rate of return of businesses simultaneously with excess supply of capital. Small corruption level might benefit the ex-ante utility of agents due to redistributive concerns, but big bribes might discourage agents from investing into smaller projects, lowering the mass of projects started up. Decentralized corruption is relevant when a lot of decisions is made simultaneously by different people. A centralized corruption is relevant when one agent monopolizes the allocation of a resource. Most people face corruption everywhere: it’s never the case that, for example, police is corrupt, but education is not. Moreover, a corrupt
Publication Year: 2012
Publication Date: 2012-01-01
Language: en
Type: article
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