Corruption

74 Pages Posted: 14 Mar 2012 Last revised: 19 Jun 2012

See all articles by Abhijit V. Banerjee

Abhijit V. Banerjee

Massachusetts Institute of Technology (MIT) - Department of Economics

Sendhil Mullainathan

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Rema Hanna

Harvard University - Harvard Kennedy School (HKS)

Multiple version iconThere are 2 versions of this paper

Date Written: March 13, 2012

Abstract

In this paper, we provide a new framework for analyzing corruption in public bureaucracies. The standard way to model corruption is as an example of moral hazard, which then leads to a focus on better monitoring and stricter penalties with the eradication of corruption as the final goal. We propose an alternative approach which emphasizes why corruption arises in the first place. Corruption is modeled as a consequence of the interaction between the underlying task being performed by bureaucrat, the bureaucrat's private incentives and what the principal can observe and control. This allows us to study not just corruption but also other distortions that arise simultaneously with corruption, such as red-tape and ultimately, the quality and efficiency of the public services provided, and how these outcomes vary depending on the specific features of this task. We then review the growing empirical literature on corruption through this perspective and provide guidance for future empirical research.

Keywords: Corruption, Institutions, Development

JEL Classification: O10, O43, O12, D02

Suggested Citation

Banerjee, Abhijit V. and Mullainathan, Sendhil and Hanna, Rema, Corruption (March 13, 2012). MIT Department of Economics Working Paper No. 12-08; HKS Working Paper No. 12-023. Available at SSRN: https://ssrn.com/abstract=2022236 or http://dx.doi.org/10.2139/ssrn.2022236

Abhijit V. Banerjee (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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Room E52-252D
Cambridge, MA 02142
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Sendhil Mullainathan

Harvard University - Department of Economics ( email )

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Cambridge, MA 02138
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617-496-2720 (Phone)
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National Bureau of Economic Research (NBER) ( email )

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617-588-1473 (Phone)
617-876-2742 (Fax)

Rema Hanna

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States

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