Bribery, Hold-Up and Bureaucratic Structure

John Bennett () and Matthew Rablen

No 2018011, Working Papers from The University of Sheffield, Department of Economics

Abstract: We analyze the provision of infrastructure by a foreign investor when the domestic bureaucracy is corrupt, but puts some weight on domestic welfare. The investor may pay a bribe in return for a higher provisional contract price. After the investment has been sunk, the bureaucracy may hold up the investor, using the threat of expropriation to demand a lower Önal price or another bribe. Depending on the level of care for domestic welfare, greater bureaucratic centralization may increase or decrease domestic welfare. Because of the threat of hold-up, bribery may result in greater domestic welfare than the honest benchmark does.

Keywords: bribery; hold-up; renegotiation; bureaucratic structure; centralized bureaucracy; decentralized bureaucracy. (search for similar items in EconPapers)
JEL-codes: D73 H11 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2018-11
New Economics Papers: this item is included in nep-cta and nep-tra
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http://www.sheffield.ac.uk/economics/research/serps/articles/2018_011 First version, June 2018 (application/pdf)

Related works:
Journal Article: Bribery, hold‐up, and bureaucratic structure (2021)
Working Paper: Bribery, Hold-Up and Bureaucratic Structure (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:shf:wpaper:2018011

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