Bribery, Reneging, and Competition Among Bureaucrats

Soham Baksi and Pinaki Bose

Departmental Working Papers from The University of Winnipeg, Department of Economics

Abstract: The paper examines the efficiency of competition among corrupt bureaucrats for the provision of a homogeneous public good, such as permits for projects. In an environment where bribe contracts suffer from enforcement problems, and bureaucrats have to expend effort to process applications and issue permits, a monopolist authority can be the more efficient form of bureaucratic organization compared to multiple competing bureaucrats. We argue that bribe transactions are covert and illegal, and not usually conducted as spot exchanges. Corrupt officials charge advance payments before processing applications, and sometimes renege on the delivery of permits. Incorporating these empirically-relevant features in a model with endogenous reneging by bureaucrats, we find that bureaucratic competition increases the incentive to renege on providing permits, thus lowering the number of productive enterprises in operation. While a monopolist bureaucrat charges a higher bribe, he also clears more projects. Consequently, social welfare can be higher in the absence of Bertrand competition among corrupt officials.

JEL-codes: D73 H11 K42 O17 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2023-06
New Economics Papers: this item is included in nep-law
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