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
Date Written: 2013
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: Suggested Citation