A Game-Theoretic Analysis of Corruption in Bureaucracies

Author/Editor:

Era Dabla-Norris

Publication Date:

June 1, 2000

Electronic Access:

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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.

Series:

Working Paper No. 2000/106

Subject:

Corruption Crime Labor Public sector wages Tax incentives Wages

English

Publication Date:

June 1, 2000

ISBN/ISSN:

9781451852882/1018-5941

Stock No:

WPIEA1062000

Pages:

22

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