Compliance Costs, Corruption and the Differentiation of Bureaucratic Services

20 Pages Posted: 4 Feb 2016

See all articles by André Seidel

André Seidel

University of Bergen, Department of Economics

Date Written: December 2015

Abstract

How to fight petty day-to-day corruption is a question often debated by politicians, by the public and in the economic literature. Early studies have noted that a simple and well-known way to fight day-to-day corruption is to create competition among corrupt officials. This paper shows that even a benevolent government might not encourage competition among officials in a way that eliminates corruption. This is due to a tradeoff between corruption and compliance costs. More differentiated bureaucratic services decrease compliance costs but increase the leeway for extortion. The analysis further reveals that exogenous shocks, for example in the form of foreign aid that aims to improve anti-corruption capacities, may prompt a benevolent government to increase the differentiation of bureaucratic services, thereby leading to an increase in corruption.

Keywords: corruption, compliance costs, bureaucratic competition

JEL Classification: D730, L130

Suggested Citation

Seidel, André, Compliance Costs, Corruption and the Differentiation of Bureaucratic Services (December 2015). CESifo Working Paper Series No. 5683, Available at SSRN: https://ssrn.com/abstract=2727152

André Seidel (Contact Author)

University of Bergen, Department of Economics ( email )

Muséplassen 1
N-5008 Bergen, +47 55 58
Norway

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