TY - JOUR
T1 - A model of bureaucracy and corruption
AU - Shi, Shouyong
AU - Temzelides, Ted
PY - 2004/8/1
Y1 - 2004/8/1
N2 - We analyze bureaucracy and corruption 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. Bureaucracy is modeled as a group of agents who enjoy centralized production and consumption. Transaction patterns between the bureaucracy and the private sector are fully endogenous. Centralized production and consumption in the bureaucracy give rise to low power incentives for the individual bureaucrats. As a result, private agents might bribe bureaucrats, whereas they do not bribe each other. An equilibrium with corruption and an equilibrium without corruption can coexist. We discuss some welfare implications of the model.
AB - We analyze bureaucracy and corruption 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. Bureaucracy is modeled as a group of agents who enjoy centralized production and consumption. Transaction patterns between the bureaucracy and the private sector are fully endogenous. Centralized production and consumption in the bureaucracy give rise to low power incentives for the individual bureaucrats. As a result, private agents might bribe bureaucrats, whereas they do not bribe each other. An equilibrium with corruption and an equilibrium without corruption can coexist. We discuss some welfare implications of the model.
UR - http://www.scopus.com/inward/record.url?scp=4544381082&partnerID=8YFLogxK
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U2 - 10.1111/j.0020-6598.2004.00290.x
DO - 10.1111/j.0020-6598.2004.00290.x
M3 - Review article
AN - SCOPUS:4544381082
SN - 0020-6598
VL - 45
SP - 873
EP - 908
JO - International Economic Review
JF - International Economic Review
IS - 3
ER -