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How Middle-men can Undermine Anti-corruption Reforms

Kjetil Bjorvatn, Gaute Torsvik and Bertil Tungodden ()

No WP 2005: 1, CMI Working Papers from CMI (Chr. Michelsen Institute), Bergen, Norway

Abstract: The anti-corruption reform in the Tanzanian tax bureaucracy in the mid-1990s was apparently a short-lived success. In the wake of the reform, a number of "tax experts" established themselves in the market, many of them being laid off tax bureaucrats. We argue that middle-men can undermine the effect of an anti-corruption reform by reducing the uncertainty that firms face vis-à-vis a reformed tax bureaucracy, which in turn may encourage firms to pay bribes rather than taxes. Indeed, under some circumstances, middle-men can cause corruption to be higher after the reform than before the reform. Since the demand for middle-men may increase with the extent of the reform, we also demonstrate that a small reform may be more efficient in combatting corruption than a more radical reform.

Keywords: Corruption; Reform; Middle-men; Institutions; Tanzania (search for similar items in EconPapers)
JEL-codes: H26 K42 O12 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2005
New Economics Papers: this item is included in nep-pbe and nep-reg
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