Corruption, the Ability to Pay, and the Costs of Breaking the Law

Leonidas Koutsougeras (), Manuel S. Santos () and Fei Xu ()
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Leonidas Koutsougeras: University of Manchester, School of Social Science, https://www.socialsciences.manchester.ac.uk/
Manuel S. Santos: University of Miami, Miami Herbert Business School, https://www.herbert.miami.edu/
Fei Xu: Department of Economics, Umeå University, Postal: Department of Economics, Umeå University, S 901 87 Umeå, Sweden, https://www.umu.se/handelshogskolan

No 1026, Umeå Economic Studies from Umeå University, Department of Economics

Abstract: We propose a game-theoretic model of corruption to account for some crosscountry empirical regularities on the depth or prevalence of corruption, the variability of the bribe, officers’ salaries, and investment in anticorruption measures. Under standard conditions the model has a unique equilibrium in which the depth of corruption and the bribe are endogenously determined. The analysis centers on the further effects on these equilibrium values from changes in the “ability-to-pay” of the parties involved, the government’s efficiency to fight corruption, and the officer’s costs of breaking the law. A mere change in the officer’s salary, however, can be counterbalanced by a compensatory bribe; hence, the salary does not affect the depth of corruption.

Keywords: The depth of corruption; the bribe; anticorruption measures; officer’s salary; Nash equilibrium (search for similar items in EconPapers)
JEL-codes: D04 D58 D71 D73 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2024-05-27, Revised 2024-10-24
New Economics Papers: this item is included in nep-gth
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