Corruption and Bureaucratic Structure in a Developing Economy

John Bennett () and Saul Estrin

No 825, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: We address the impact of corruption in a developing economy in the context of an empirically relevant hold-up problem - when a foreign firm sinks an investment to provide infrastructure services. We focus on the structure of the economy’s bureaucracy, which can be centralized or decentralized, and characterize the ‘corruptibility’ of bureaucrats in each case. Results are explained in terms of the noninternalization, under decentralization, of the ‘bribe externality’ and the ‘price externality.’ In welfare terms, decentralization is favoured, relatively speaking, if the tax system is less inefficient, funding is less tight, bureaucrats are less venal, or compensation for expropriation is ungenerous.

Keywords: Corruption; Bureaucratic Structure; Developing Economy (search for similar items in EconPapers)
JEL-codes: D73 H11 H77 (search for similar items in EconPapers)
Pages: pages
Date: 2006-02-01
New Economics Papers: this item is included in nep-cdm, nep-pbe, nep-pol and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Corruption and Bureaucratic Structure in a Developing Economy (2006)
Working Paper: Corruption and Bureaucratic Structure in a Developing Economy (2006)
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