Embezzlement Versus Bribery

40 Pages Posted: 22 Nov 2010 Last revised: 29 Nov 2010

See all articles by C. Simon Fan

C. Simon Fan

Lingnam University - Department of Economics

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

Daniel Treisman

University of California, Los Angeles (UCLA) - Department of Political Science

Date Written: November 2010

Abstract

Corrupt officials can use their positions to enrich themselves in two ways. They can steal from the state budget--embezzling or misspending funds--or they can demand extra payments from citizens in return for services--bribery. In many circumstances, embezzlement is less distortionary than bribery. We analyze the tradeoff for governments in deciding how strictly to monitor and punish these two kinds of bureaucratic misbehavior. When bribery is more costly to economic development, governments may tolerate some embezzlement in order to reduce the extent of bribery--even though embezzlement is generally easier to detect. Embezzlement serves as a parallel to the "efficiency wage." This logic appears to hold in China, where misappropriation of public funds by officials appears to be ubiquitous.

Suggested Citation

Fan, Chengze Simon and Lin, Chen and Treisman, Daniel, Embezzlement Versus Bribery (November 2010). NBER Working Paper No. w16542. Available at SSRN: https://ssrn.com/abstract=1711682

Chengze Simon Fan (Contact Author)

Lingnam University - Department of Economics ( email )

Tuen Mun
Hong Kong
(852) 2616-7206 (Phone)
(852) 2891-7940 (Fax)

Chen Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Daniel Treisman

University of California, Los Angeles (UCLA) - Department of Political Science ( email )

405 Hilgard Ave.
3265 Bunche Hall
Los Angeles, CA 90095-1472
United States
650-725-8556 (Phone)
650-723-1687 (Fax)

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