Industrial Licensing, Bribery and Allocation Efficiency

Pinaki Bose

Bulletin of Economic Research, 1995, vol. 47, issue 1, 85-88

Abstract: In less developed countries where an industrial licensing policy governs the entry of new firms, and when government officials awarding these licenses are corrupt, an incumbent firm may deter entry by bribing the official to deny the license. The paper demonstrates that such bribery can lead to the exclusion of more efficient firms from the market. This contradicts the established result that bribery does not affect allocation efficiency. Copyright 1995 by Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research

Date: 1995
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