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Competition in Bureaucracy and Corruption

Mikhail Drugov ()

No 369, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: This paper studies the consequences of introducing competition between bureaucrats. Bureaucrats are supposed to grant licences to firms that satisfy certain requirements. Firms have to invest into satisfying these requirements. Some bureaucrats are corrupt, that is, they give the licence to any firm in exchange for a bribe. Some firms prefer to buy the licence rather than to invest and satisfy the requirements imposing negative externalities on the society. The competition regime is found to create more ex ante incentives for firms to invest while the monopoly regime is better at implementing ex post allocation, that is, distributing the licences given the firms` investment decisions. Additional results on the effects of intermediaries, staff rotation, punishments and endogenous entry to the bureaucracy are provided.

Keywords: Corruption; Competition; Bureaucracy (search for similar items in EconPapers)
JEL-codes: D73 K42 (search for similar items in EconPapers)
Date: 2007-11-01
New Economics Papers: this item is included in nep-law, nep-mic and nep-pol
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Journal Article: Competition in bureaucracy and corruption (2010) Downloads
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