Organized vs. Competitive Corruption

UPF Economics and Business Working Paper No. 526

24 Pages Posted: 13 Jun 2001

See all articles by Marco Celentani

Marco Celentani

Charles III University of Madrid - Department of Economics

Juan-José Ganuza

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences

Multiple version iconThere are 2 versions of this paper

Date Written: September 2001

Abstract

We study bureaucratic corruption in a model in which a constituency sets required levels for a given set of activities. Activities are carried out by external providers who are supervised by bureaucrats. Bureaucrats can allow providers to deliver lower activity levels than contracted in exchange for a bribe. The constituency sets the optimal activity levels weighing off the value of activity levels, their costs, as well as the possibility for the bureaucrats to be corrupt. We compute equilibrium corruption in two different settings: 1) Each bureaucrat maximizes his own individual utility (competitive corruption); 2) An illegal syndicate maximizes total proceeds from corruption (organized corruption). We show that the illegal syndicate acts in such a way as to restrain the total number of corrupt transactions, so that corruption is lower when it is organized than when it is competitive.

Keywords: Competitive and organized corruption, institutional response

JEL Classification: C72, D73, K42

Suggested Citation

Celentani, Marco and Ganuza, Juan, Organized vs. Competitive Corruption (September 2001). UPF Economics and Business Working Paper No. 526, Available at SSRN: https://ssrn.com/abstract=273411 or http://dx.doi.org/10.2139/ssrn.273411

Marco Celentani

Charles III University of Madrid - Department of Economics ( email )

Calle Madrid 126
Getafe, 28903
Spain
+34-91-624 9546 (Phone)
+34-91-624 9875 (Fax)

Juan Ganuza (Contact Author)

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain
(34-93) 542 27 19 (Phone)
(34-98) 542 17 46 (Fax)