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| Author: | Shi, S. Temzelides, T. |
| Title: | A model of bureaucracy and corruption |
| Journal: | International Economic Review
2004 : AUG, VOL. 45:3, p. 873-908 |
| Index terms: | Bureaucracy Corruption Models |
| Language: | eng |
| Abstract: | This paper analyzes bureaucracy (hereafter as: b-cracy.) and corruption (here as: corr.) in a market with decentralized exchange and "lemons". Exchange is modeled as a sequence of bilateral, random matches. Agents have private information about the quality of goods they produce and can supplement trade with socially inefficient bribes. B-cracy is modeled as a group of agents enjoying centralized production and consumption. Transaction patterns btw. the b-cracy and the private sector are fully endogenous. Centralized production and consumption in the b-cracy give rise to low power incentives for the individual bureaucrats. As a result, private agents might bribe b-crats, whereas they do not bribe each other. An equilibrium with corr. and an equilibrium without corr. can coexist. |
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