Initiation of Corrupt Exchanges and Severity of Corruption

Financial Theory and Practice, vol. 37 no.2, pp. 207-222, 2013

Posted: 26 Sep 2014 Last revised: 19 Apr 2016

See all articles by Rajeev K. Goel

Rajeev K. Goel

Illinois State University - Department of Economics

Date Written: 2013

Abstract

This paper examines the effectiveness of corruption control depending upon whether the bribe taker or the bribe giver initiates the corrupt interaction. The probability of corrupt exchanges depends upon the bribe and the corrupt market structure. The probability of apprehension is set but punishment can be influenced via bribes. Results show that the effectiveness of apprehension hinges on whether higher bribes invite harsher fines. Competition for favors intimidates the bribe giver into offering lower bribes, while greater agency competition has a similar effect on the bribe demanded. Consistent with intuition, better paid bureaucrats demand smaller bribes. Some implications for anti-corruption policy are discussed.

Keywords: corruption, bribe takers, bribe givers, competition, probability, penalty

JEL Classification: K4, L4

Suggested Citation

Goel, Rajeev K., Initiation of Corrupt Exchanges and Severity of Corruption (2013). Financial Theory and Practice, vol. 37 no.2, pp. 207-222, 2013. Available at SSRN: https://ssrn.com/abstract=2500951

Rajeev K. Goel (Contact Author)

Illinois State University - Department of Economics ( email )

Normal, IL 61790-4200
United States

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