What is the Contribution of the Theory of Redistribution Systems to the Theory of Corruption?
18 Pages Posted: 31 Jan 2014
Date Written: January 29, 2011
Scholars making economic policy recommendations to resolve the corruption problem use several approaches, the most dominant of which are principal-agent theory and rent-seeking. In this paper, we argue that the principal-agent theory has problems accounting for the environment in which the agents offering and accepting corruption operate as well as explaining the importance of the agents for the survival of their environment. The rent-seeking theory, on the other hand, finds it difficult to establish socially effective legislation and ways to determine the barriers to entry that motivate agents to behave corruptly. Both problems, however, are central to solving the corruption problem. Lacking the knowledge of the agent’s environment (system) and their significance for the survival of the system, the theory cannot define incentives that would discourage agents from engaging in corrupt behavior. If the rent-seeking theory does not identify the barriers to entry that motivate agents to behave corruptly, it cannot identify the proper legislation that would deter corrupt behavior and lead to economic development. For these reasons, we investigate whether both problems can be explained and resolved with an alternative theory of redistribution systems ant its partial theory of parallel redistribution games.
Keywords: Corruption, redistribution system, parallel redistribution game, game theory
JEL Classification: D72, D74, D82, C71
Suggested Citation: Suggested Citation