When Competition Corrupts: A Theoretical Analysis of Market Structure and the Incidence of Corruption

10 Pages Posted: 20 Apr 2016

See all articles by Kaushik Basu

Kaushik Basu

Cornell University - Department of Economics; IZA Institute of Labor Economics; Brookings Institution

Tamara McGavock

Cornell University

Boyang Zhang

Cornell University, Department of Economics, Students

Date Written: September 1, 2013

Abstract

The paper develops a simple model to demonstrate that, paradoxically, greater competition may exacerbate the problem of corruption. Market participants engaging in corrupt practices enjoy lower production costs -- maybe because they pay a bribe to avoid installing the environmental safeguards required by law -- such that honest players are driven out of the market when the market becomes sufficiently competitive.

Keywords: Public Sector Corruption & Anticorruption Measures, Water and Industry, Markets and Market Access, Gender and Law, Microfinance

Suggested Citation

Basu, Kaushik and McGavock, Tamara and Zhang, Boyang, When Competition Corrupts: A Theoretical Analysis of Market Structure and the Incidence of Corruption (September 1, 2013). World Bank Policy Research Working Paper No. 6596. Available at SSRN: https://ssrn.com/abstract=2323100

Kaushik Basu

Cornell University - Department of Economics ( email )

414 Uris Hall
Ithaca, NY 14853-7601
United States
607-255-2525 (Phone)
607-255-2818 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Brookings Institution ( email )

1775 Massachusetts Ave, NW
Washington, DC 20036
United States

Tamara McGavock

Cornell University ( email )

Ithaca, NY 14853
United States

Boyang Zhang

Cornell University, Department of Economics, Students ( email )

Ithaca, NY
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
117
Abstract Views
457
rank
253,798
PlumX Metrics