Corruption and Decentralization

Emanuela Carbonara

Working Papers from Dipartimento Scienze Economiche, Universita' di Bologna

Abstract: This paper studies the effect of decentralization on corruption in a hierarchical organization, where decentralization is intended as the delegation of control power to lower levels in a hierarchy. Decentralization causes a loss in control to the higher levels, thus curbing their incentives to monitor and detect corrupt activities. However, it also lowers the expected gains from corruption as, following decentralization, the number of individuals who are in charge of a single decision is reduced. It is then more likely that corrupt agents are called to bear the consequences of their actions. Hence, decentralization, although creating agency problems inside an organization, can help in controlling corruption.

Date: 1998-01
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Persistent link: https://EconPapers.repec.org/RePEc:bol:bodewp:342

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