The dynamics of corruption with the Ratchet effect

Jay Choi and Marcel Thum

No 04/01, Dresden Discussion Paper Series in Economics from Technische Universität Dresden, Faculty of Business and Economics, Department of Economics

Abstract: This paper provides a simple model of corruption dynamics with the ratchet effect. Corrupt officials have ex post the incentive to price discriminate entrepreneurs based on the entry decisions made in an earlier period. The inability of government officials to commit to future money demands induces entrepreneurs to delay entry in order to receive a discount in the permit price later. Even though the dynamic setting leaves the corrupt official with less extortion power, social welfare may decrease. We also explore the effect of the official's tenure stability on the extent of corruption. This allows us to identify circumstances under which the often observed practice of job rotation can help mitigate corruption.

Keywords: corruption dynamics; ratchet effect; ex post opportunism; dynamic consistency (search for similar items in EconPapers)
JEL-codes: D9 H2 K4 L1 (search for similar items in EconPapers)
Date: 2001
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Related works:
Journal Article: The dynamics of corruption with the ratchet effect (2003)
Working Paper: The Dynamics of Corruption with the Ratchet Effect (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:tuddps:0401

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