Competition in Bureaucracy and Corruption∗
نویسنده
چکیده
This paper studies the consequences of introducing competition between bureaucrats. Bureaucrats are supposed to grant licences to firms that satisfy certain requirements. Firms have to invest into satisfying these requirements. Some bureaucrats are corrupt, that is, they give the licence to any firm in exchange for a bribe. Some firms prefer to buy the licence rather than to invest and satisfy the requirements imposing negative externalities on the society. It is found that the competition regime creates more incentives for firms to invest which is beneficial for the welfare, however, if firms’ behavior does not change, the competition regime decreases the welfare. Additional results on dynamic entry to the bureaucracy and the effect of punishments are given. JEL Classification: D73, K42.
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