Competition in Bureaucracy and Corruption

Journal of Development Economics, Vol. 92, No. 2, pp. 107-114, July 2010

University of Oxford Economics Working Paper No. 369

25 Pages Posted: 8 Nov 2007 Last revised: 27 May 2010

See all articles by Mikhail Drugov

Mikhail Drugov

Centre for Economic Policy Research (CEPR); New Economic School (NES)

Date Written: January 12, 2009

Abstract

This paper studies the consequences of introducing competition between bureaucrats. Firms are supposed to invest into eliminating negative externalities of production, while bureaucrats administer the process by issuing licences. Some bureaucrats are corrupt, that is, they issue a licence to any firm in exchange for a bribe. 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 effect of punishments and bureaucrats' rotation are provided.

Keywords: Corruption, competition, bureaucracy, red tape

JEL Classification: D73, K42

Suggested Citation

Drugov, Mikhail, Competition in Bureaucracy and Corruption (January 12, 2009). Journal of Development Economics, Vol. 92, No. 2, pp. 107-114, July 2010; University of Oxford Economics Working Paper No. 369. Available at SSRN: https://ssrn.com/abstract=1028466

Mikhail Drugov (Contact Author)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

New Economic School (NES) ( email )

100A Novaya Street
Moscow, Skolkovo 143026
Russia

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