Corrupt Relational Contracting

Johann Graf Lambsdorff () and Utku Teksoz
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Johann Graf Lambsdorff: Department of Economics, University of Goettingen, http://www.vwl.wiso.uni-goettingen.de

No 113, Departmental Discussion Papers from University of Goettingen, Department of Economics

Abstract: Because corruption must be hidden from the public and is not enforced by courts it entails transaction costs, which are larger than those from legal exchange. This suggests that corrupt contracts are primarily relational contracts where legal exchange serves as a basis for sealing and enforcing corrupt agreements. Legal exchange not only provides for corrupt opportunities, but for the necessary enforcement mechanisms. Examples of such legal exchange are long-term business exchange, belonging to the same firm or political party or being embedded in social relationships. The latter may even comprise the engagement in charitable institutions. Reform should not only focus on limiting opportunities for corrupt behavior but also on impeding the enforcement of corrupt agreements.

Keywords: Corruption; Secrecy; Transaction costs; Opportunism; Reputation; Trust (search for similar items in EconPapers)
JEL-codes: D23 K42 L14 (search for similar items in EconPapers)
Date: 2002-05-01
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Citations: View citations in EconPapers (26)

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Persistent link: https://EconPapers.repec.org/RePEc:got:vwldps:113

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