Competition in Bureaucracy and Corruption
University of Oxford Economics Working Paper No. 369
25 Pages Posted: 8 Nov 2007 Last revised: 27 May 2010
Date Written: January 12, 2009
This paper studies the consequences of introducing competition between bureaucrats. Firms are supposed to invest into eliminating negative externalities of production, while bureaucrats administer the process by issuing licences. Some bureaucrats are corrupt, that is, they issue a licence to any firm in exchange for a bribe. The competition regime is found to create more ex ante incentives for firms to invest, while the monopoly regime is better at implementing ex post allocation, that is, distributing the licences given the firms' investment decisions. Additional results on the effect of punishments and bureaucrats' rotation are provided.
Keywords: Corruption, competition, bureaucracy, red tape
JEL Classification: D73, K42
Suggested Citation: Suggested Citation