Decentralized Bribery and Market Participation

Sergey Popov

Scandinavian Journal of Economics, 2015, vol. 117, issue 1, 108-125

Abstract: I propose a bribery model that examines decentralized bureaucratic decision-making. There are multiple stable equilibria. High levels of bribery reduce an economy's productivity because corruption suppresses small business, and reduces the total graft, even though the size of an individual bribe might increase. Decentralization prevents movement towards a Pareto-dominant equilibrium. Anticorruption efforts, even temporary ones, might be useful to improve participation, if they lower the bribe levels demanded and thus encourage small businesses to participate.

Date: 2015
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Working Paper: Decentralized Bribery and Market Participation (2013)
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