Bureaucracy intermediaries, corruption and red tape ¬リニ

a r t i c l e i n f o Intermediaries that assist individuals and firms with the government bureaucracy are common in developing countries. Although such bureaucracy intermediaries are, anecdotally, linked with corruption and welfare losses, few formal analyses exist. We introduce a model in which a government license can benefit individuals. We study the net license gain when individuals get the license through the regular licensing procedure, through bribing or through intermediaries. For a given procedure, individuals using intermediaries are better off than if intermediaries and corruption had not existed. Then, we study the incentives of corrupt bureaucrats to create red tape. Bureaucrats implement more red tape and individuals are unambiguously worse off in a setting with intermediaries than with direct corruption only. Intermediaries can thus improve access to the bureaucracy, but also strengthen the incentives to create red tape – a potential explanation why licensing procedures tend to be long in developing countries. Intermediaries that assist individuals and firms with the government bureaucracy are present throughout the developing world. Yet, there is a limited understanding of what such bureaucracy intermediaries do. Although the prevalence of intermediaries is, anecdotally, linked with corruption and welfare losses, there are few formal analyses and an almost complete lack of empirical studies. This paper aims at filling a gap in the theoretical literature on bureaucracy intermediaries. In a model where individuals can get a benefit by going through a licensing procedure at the government bureaucracy , we study how the net gain from the license is affected when it can also be obtained through intermediaries. We study how the incentives of bureaucrats to create red tape are affected when there are intermediaries , and the effect of such " endogenous red tape " on the license gain. We also endogenize the existence of the intermediary sector itself. The study focuses on one specific aspect of what intermediaries can offer individuals and firms — time saving. Individuals can get the license through the regular procedure, or by bribing corrupt bureaucrats to get a speedier treatment, or from an intermediary, which allows for even more time saving. From individuals' choice of how to get the license, we derive several interesting and novel results. We first show that, ceteris paribus, individuals that get the license through either corrupt bureaucrats or intermediaries are better off than if corruption and intermediaries had not existed. Second, and …