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A Game-Theoretic Analysis of Corruption in Bureaucracies [electronic resource] / Era Dabla-Norris.

By: Dabla-Norris, Era.
Material type: materialTypeLabelBookSeries: IMF Working Papers; Working Paper: No. 00/106Publisher: Washington, D.C. : International Monetary Fund, 2000Description: 1 online resource (22 p.).ISBN: 1451852886 :.ISSN: 1018-5941.Subject(s): Central Authorities | Hierarchies | Multiple Equilibria | Salaries | Wage Incentives | Wage | Congo, Democratic Republic of the | France | IndiaAdditional physical formats: Print Version:: A Game-Theoretic Analysis of Corruption in BureaucraciesOnline resources: IMF e-Library | IMF Book Store Abstract: This paper examines interactions between self-interested agents in a two-tier government hierarchy, consisting of a central authority and bureaucrats in a two-stage game, where the actions of agents affect private sector allocations. Conditions under which lower-tier corruption arises as an equilibrium characterization of the game are identified. If bureaucratic corruption sufficiently reduces the tax base, policies that deter corruption may be optimal. When monitoring is expensive or ineffective, lower-level corruption arises as equilibrium. Tax farming and the sale of offices can occur in these equilibria. In addition, strategic complementarities between bureaucrats may give rise to multiple equilibria.
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This paper examines interactions between self-interested agents in a two-tier government hierarchy, consisting of a central authority and bureaucrats in a two-stage game, where the actions of agents affect private sector allocations. Conditions under which lower-tier corruption arises as an equilibrium characterization of the game are identified. If bureaucratic corruption sufficiently reduces the tax base, policies that deter corruption may be optimal. When monitoring is expensive or ineffective, lower-level corruption arises as equilibrium. Tax farming and the sale of offices can occur in these equilibria. In addition, strategic complementarities between bureaucrats may give rise to multiple equilibria.

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