Why is Corruption a Problem of the State?

Prague Economic Papers, Vol. 16, No. 2, pp. 165-179, 2007

15 Pages Posted: 31 Oct 2010 Last revised: 29 Jan 2013

See all articles by Tomáš Otáhal

Tomáš Otáhal

Mendel University - Faculty of Economics and Business Administration

Date Written: April 15, 2006

Abstract

Economic theories of the last decades provide analytical framework within which we can explain institutional conditions for corrupt action. Specialists making economic policy recommendations to resolve this problem use several approaches, the most dominant of which are rent-seeking and agency theories. In this paper, I explain economic policy recommendations that stem out of both approaches. I argue that scholars suggesting these recommendations within these two frameworks do not understand each other because of different assumptions they make. More specifically, I show that two sets of policy recommendations presented here are based on the particular system of property rights assumed within each theory. In this example, I show why corruption is a problem of the state rather than the market.

Keywords: Agent, agency theory, bribery, contract, corruption, competition, comparative analysis, principal, rent seeking

JEL Classification: D010, D720, D730, D810

Suggested Citation

Otáhal, Tomáš, Why is Corruption a Problem of the State? (April 15, 2006). Prague Economic Papers, Vol. 16, No. 2, pp. 165-179, 2007, Available at SSRN: https://ssrn.com/abstract=1699866

Tomáš Otáhal (Contact Author)

Mendel University - Faculty of Economics and Business Administration ( email )

Staňkova 578/16b
Brno, 602 00
Czech Republic

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