A Game-Theoretic Analysis of Corruption in Bureaucracies

June 1, 2000

Preview Citation

Format: Chicago

Era Dabla-Norris. A Game-Theoretic Analysis of Corruption in Bureaucracies, (USA: International Monetary Fund, 2000) accessed December 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines interactions between self-interested agents in a two-tier government hierarchy, consisting of a central authority and bureaucrats in a two-stage game, where the actions of agents affect private sector allocations. Conditions under which lower-tier corruption arises as an equilibrium characterization of the game are identified. If bureaucratic corruption sufficiently reduces the tax base, policies that deter corruption may be optimal. When monitoring is expensive or ineffective, lower-level corruption arises as equilibrium. Tax farming and the sale of offices can occur in these equilibria. In addition, strategic complementarities between bureaucrats may give rise to multiple equilibria.

Subject: Corruption, Crime, Labor, Public sector wages, Tax incentives, Wages

Keywords: Corruption, Decision variable, Dictator fall, Economic activity, Europe, Hierarchies, Monitoring effort, Multiple equilibria, Participation constraint, Public sector wages, Utility function, Wages, WP

Publication Details

Pages:

22
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2000/106
Stock No:

WPIEA1062000
ISBN:

9781451852882
ISSN:

1018-5941

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