Red Tape and Corruption

Sergei Guriev

No 3972, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study the emergence and interaction of red tape and corruption in a principal-bureaucrat-agent hierarchy. The principal is to provide the agent with a unit of a good that involves externalities so that market mechanisms fail to achieve first best. Red tape partially solves the problem. While imposing a cost on the agent, red tape also produces information about the agent’s type. Therefore the socially-optimal level of red tape is not trivial. It is hard, however, to implement the social optimum if the bureaucrat in charge of red tape is corrupt. We consider two types of corruption. First, the bureaucrat may extort bribes from the agent in exchange for reducing the amount of red tape. Second, the bureaucrat may take bribes to conceal the information produced through red tape. The former kind of corruption tends to reduce red tape, while the latter provides incentives for excessive red tape: the more red tape, the more likely the bureaucrat can get the bribes ex post. We show that the latter effect prevails, and the equilibrium level of red tape is always above the social optimum.

Keywords: Corruption; red tape; three-tier hierarchy (search for similar items in EconPapers)
JEL-codes: D73 K42 O17 (search for similar items in EconPapers)
Date: 2003-07
New Economics Papers: this item is included in nep-lam, nep-law and nep-tra
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://cepr.org/publications/DP3972 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Red tape and corruption (2004)
Working Paper: Red tape and corruption (2004)
Working Paper: Red tape and corruption (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:3972

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP3972

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().