corruption and government size a disaggregated analysis using annual state level data over 1983 1987 this paper examines the effect of government size on corruption by public officials by including both demand and supply side incentives for engaging in corrupt practices our objectives are twofold first we assess the relationship between the incidence of corruption and overall measures of the size of the federal government and the state local sector in each state second we explore what kinds of government activities are more likely to be successful in deterring abuse of public office our results are generally supportive of becker s crime and punishment model regarding the primary focus of the paper our results show that government size in particular spending by state governments does indeed have a strong positive influence on corruption

is the efficiency wage efficient the social norm and organizational corruption the effectiveness of efficiency wage incentives is often jeopardized by perverse organizational corruption we model organizational corruption as a phenomenon of social interaction and relate the substantial psychological role characterizing the social norm to the corruption problem we find that if the status quo bribery rate within the firm is high social norms can no longer serve as a sufficient sanction against a corrupt supervisor pandemic organizational corruption tends to generate a critical mass effect the snowball effect which intensifies the corruption effect this intensified effect due to the snowballing character of social norms may more than offset the usual incentive effect of wages resulting in more widespread shirking in the firm jel classification d82 j41

the role of wages and auditing during a crackdown on corruption in the city of buenos aires abstract we study the prices paid for basic inputs during a crackdown on corruption in the public hospitals of the city of buenos aires argentina during 1996 97 we find a well defined negative effect on the measures used to capture corruption prices paid by hospitals for basic homogeneous inputs decrease by 15 percent during the first 9 months of the crackdown after this period prices increase but they are still 10 percent lower than those prevailing before the crackdown relative to the precrackdown period higher wages play no role in inducing lower input prices when audit intensity can be expected to be maximal during the first phase of the crackdown but have a negative and well defined effect when audit intensity takes intermediate levels the last phase of the crackdown controlling for fixed effects we find that the wage elasticity of input prices exceeds 20 these results are consistent with the standard model of bribes of gary becker and george stigler

a theory of collective reputations with applications to the persistence of corruption and to firm quality the paper is a first attempt at modelling the idea of group reputation as an aggregate of individual reputations a member s current incentives are affected by his past behaviour and because his track record is observed only with noise by the group s past behaviour as well the paper thus studies the joint dynamics of individual and collective reputations and derives the existence of stereotypes from history dependence rather than from a multiplicity of equilibria or from the existence of a common trait as is usually done in the literature it shows that new members of an organization may suffer from an original sin of their elders long after the latter are gone and it derives necessary and sufficient conditions under which group reputations can be rebuilt last the paper applies the theory to analyse when a large firm can maintain a reputation for quality 1 collective reputations collective reputations play an important role in economics and the social sciences countries ethnic racial or religious groups are known to be hard working honest corrupt hospitable or belligerent some firms enjoy substantial rents from their reputations for producing high quality products some departments are reported to treat their faculty or students fairly the paper is a first attempt at modelling the idea of group reputation as an aggregate of individual reputations a member s current incentives are affected by her past behaviour and because her track record is observed only with noise by the group s past behaviour as well the paper studies the joint dynamics of individual and collective reputations in a model in which current generations are progressively replaced by new ones and derives the existence of stereotypes from history dependence rather than from a multiplicity of equilibria or from the existence of a common trait as is usually done in the literature see section 2 for a detailed comparison with the literature it shows that new members of an organization may suffer from an original sin of their elders long after the latter are gone and it derives necessary and sufficient conditions under which group reputations can be rebuilt last the paper applies the theory to analyse when a large firm can maintain a reputation for quality let us spell out the building blocks of our theory in more detail a a group s reputation is only as good as that of its members each member is characterized by individual traits such as talent diligence or honesty past individual behaviour conveys information about these traits and generates individual reputations

an equilibrium queuing model of bribery it is sometimes argued that bribery is inefficient because bureaucrats may cause delays for attracting more bribes this hypothesis is examined in the context of a queue where customers having different values of time are ranked by their bribe payments to the queue s server the nash equilibrium strategies of the customers are derived it is shown that the server is unlikely to slow down the allocation process when bribery is allowed the model does not have stringent informational requirements and the equilibrium outcome minimizes the average value of time costs of the queue it also suggests a useful auctioning procedure

high corruption income in ming and qing china abstract we develop an economic model that explains historical data on government corruption in ming and qing china in our model officials extensive powers result in corrupt income matching land s share in output we estimate corrupt income to be between 14 and 22 times official income resulting in about 22 of agricultural output accruing to 0 4 of the population the results suggest that eliminating corruption through salary reform was possible in early ming but impossible by mid qing rule land reform may also be ineffective because officials could extract the same rents regardless of ownership high officials incomes and the resulting inequality may have also created distortions and barriers to change that could have contributed to china s stagnation over the five centuries 1400 1900s

corruption as a self fulfilling prophecy evidence from a survey experiment in costa rica an influential body of scholarship argues that corruption behaves as a selffulfilling prophecy the idea of this work is that levels of corruption emerge endogenously as a result of a society wide coordination game in which ther individual returns to corrupt behavior are a function of how disposed towards corruption the other members of society are perceived as being an empirical implication of this logic is that if one were to exogenously perturb beliefs about societal levels of corruption upward willingness to engage in corruption should increase as a consequence the current paper evaluates this claim by utilizing an information experiment embedded in a large scale household survey conducted in the gran area metropolitana gam of costa rica from october 2013 to april 2014 n 4200 changes in beliefs about corruption were induced via the random assignment of an informational display depicting the increasing percentage of costa ricans who have experienced or directly observed an act of corruption from 2006 to 2011 the paper finds that on average assignment to this display relative to the control condition increased the probability that a respondent would be willing to pay a bribe to a police officer by approximately 0 04 to 0 08 thereby providing supporting evidence for the self fulfilling prophecy hypothesis

income distribution and equilibrium multiplicity in a stigma based model of tax evasion abstract this paper incorporates continuous income distribution into the stigma based model of tax compliance the paper investigates the effect of income distribution on the existence of multiple equilibria and characterizes the conditions under which multiple equilibria emerge precisely multiple equilibria exist if taxpayer incomes are sufficiently homogeneous because the social coordination effect dominates the individual characteristics effect numerical simulations show that the main proposition is robust to allowing two step audit policies on the part of the tax agency under the presumption that the best or good equilibrium is selected whenever there are multiple equilibria as a byproduct the effect of various forms of tax reforms on the optimal two step audit policy the equilibrium compliance and fiscal revenue is analyzed

on the economic incentives for taking bribes this paper presents an empirical analysis of the factors affecting bribe taking by public officials factors influencing the acceptance of bribes include the probability of being convicted severity of punishment government salary relative to private sector income the demonstration effect and the unemployment rate our results indicate that higher probability of being convicted discourages the acceptance of bribes as does more severe punishment low relative earnings high unemployment and the demonstration effect of aggregate advertising all lead to increased bribe taking

geographical variations in expenditure of learning disability services in england this article investigates the determinants of local authority learning disability ld expenditure in england it adopts a reduced form of demand and supply model extended to account for possible interdependence between municipalities risk factors such as people aged under 14 mortality rate and lone parents seem to play an important role in explaining geographical variation of spending further labour municipalities on average allocate lower resources on ld than do other political parties finally results corroborate recent findings in economics that authorities interact with each other when allocating public resources

corruption in tax administration abstract we extend the game theoretic model of graetz reinganum and wilde 1986 to allow for corruption in tax administration in the presence of corruption audit rates are generally higher than in its absence in fact in the presence of corruption it is possible to sustain equilibria in which all returns are audited moreover when some auditors accept bribes it is possible for increases in the fine rate or the tax rate to reduce expected government revenue

leading bureaucracies to the tipping point an alternative model of multiple stable equilibrium levels of corruption we present a novel model of corruption dynamics in the form of a nonlinear optimal dynamic control problem it has a tipping point but one whose origins and character are distinct from that in the classic schelling 1978 model the decision maker choosing a level of corruption is the chief or some other kind of authority figure who presides over a bureaucracy whose state of corruption is influenced by the authority figure s actions and whose state in turn influences the pay off for the authority figure the policy interpretation is somewhat more optimistic than in other tipping models and there are some surprising implications notably that reforming the bureaucracy may be of limited value if the bureaucracy takes its cues from a corrupt leader

on controlling crime with corrupt officials abstract this paper attempts to synthesize the recently developed strategic approach towards modeling corruption and the classical views the following propositions are sought to be proved a if reward schemes are introduced the classical and the strategic approaches yield similar results so far as controlling crime is concerned b with probability of detection being dependent on the effort of a corrupt official crime cannot be controlled and c in the context of an infinitely repeated game of crime the corrupt law enforcing agent might choose less bribes and lower effort level than the myopic optimal and hence would strategically pamper crime

corruption clubs empirical evidence from kernel density estimates a common finding of many analytical models is the existence of multiple equilibria of corruption countries characterized by the same economic social and cultural background do not necessarily experience the same levels of corruption in this article we use kernel density estimation techniques to analyse the cross country distribution of corruption particular emphasis will be given to the question whether the distribution of corruption shows more than one peak we find that most of the estimated densities exhibit twin peaks we also provide some evidence on the intra distribution dynamics and the persistence of corruption we find the group of countries classified within the two clubs to be very stable corruption is a highly persistent phenomenon substantial changes in the economic political and cultural environment of countries within the corruption club are required before a significant decline of corruption is to be expected

corruption as a gamble abstract in the following model of corruption a simple game is set up whose players are a government official granting a permit conditional on a test and a candidate requesting the permit the game is solved under different assumptions as to the information sets of the players perfect information asymmetric information and imperfect information on both sides in the latter case after characterizing the solution and presenting some important comparative statics results the paper moves on to show the emergence of multiple equilibria in corruption illustrating the interaction of corruption at different hierarchical levels of an administration

does capital punishment deter white collar crimes this paper examines whether capital punishment either directly or via a spillover effect has a deterrent effect on white collar crimes using data on nearly 150 nations and various dimensions of capital punishment including capital punishment for non violent crimes we consider two widely prevalent white collar crimes corruption and the shadow economy nesting the empirical analysis in the broader literature on determinants of corruption and the shadow economy we find that capital punishment in general reduced both corruption and the shadow economy and the deterrent effect on the shadow economy was relatively more prevalent adding some empirical insights to the theoretical arguments surrounding the desirability of maximal punishments results show some trade off between the quantity and quality of punishment

valuing air quality with hedonic and discrete choice models environmental economists have been using property values in attempts to measure the value residents place on air quality as far back as the 1960s however in the years since then we have learned a great deal about how complex valuing nonmarginal changes in air quality is rosen presented a hedonic model that is still extremely influential today but the estimation strategy he outlined in that paper had some shortcomings many of these identification and endogeneity issues were corrected subsequently in papers such as palmquist 1984 parsons and bartik but none of these papers concentrated on environmental issues a central issue in estimating the demand or marginal willingness to pay functions for characteristics of housing is the identification of those behavioral functions as distinct from

corruption cooperation and endogenous time discount rates virtually all uses of repeated games tostudy of cooperation assume that people stime discount rates are exogenous andfixed here we offer an evolutionary gameembedded in a multi period model ofinvestment and consumption in whichindividual time discounts are determined bytheir convergence to values determined byevolutionary stable strategies oursubstantive motivation though iscorruption and its relationship to economicgrowth to understand the observedrelationship between levels of corruptionand economic indicators of social welfare we argue that corruption is a form ofcooperation that requires closeinterpersonal monitoring if we assume moreover that when people discount thefuture greatly the only sustainable formsof cooperation are those that allow forclose monitoring then our analysis can beinterpreted as a dynamic model of therelationship between corruption andinvestment

corruption tax evasion and the role of wage incentives with endogenous monitoring technology the importance of high salaries to circumvent bureaucratic corruption has been widely recognized in the policy debate yet there appears to be much reluctance when it comes to the implementation in this paper we argue that deterring corruption through wage incentives may become prohibitively expensive that the government finds it optimal to accept higher net revenues at the expense of honesty deviating from the existing literature we set an endogenous monitoring technology that allows us to capture the dual role of auditing as a complement with and as a substitute for wage incentives to deter bribery we find that the government is better off either completely eliminating corruption or accepting corruption by offering wages lower than the market wage offering public wage premium that does not deter bribery is suboptimal when it is optimal to deter bribery the government can do it either through wage incentives or monitoring the role of wage incentives decreases in societies with higher level of dishonesty jel d73 h26 j33 j41

how corruption may corrupt abstract the incidence of corruption appears to vary strongly across societies even for comparable activities the model highlights how the profitability of bureaucratic corruption may be related to its frequency and points toward a few mechanisms that can be used in explaining the stylized facts of varying incidence of corruption there might be multiple self fulfilling equilibria levels of corruption even when both supply and demand of corrupt acts are considered

business culture and tax evasion why corruption and the unofficial economy can persist abstract this paper shows that business and tax inspection culture can create multiple equilibria in bad equilibria high cheating and corruption increases in penalties or auditing can have perverse impacts and increase cheating the source of the multiple equilibria is the externalities created by business and tax inspection cultures as tax evasion and corruption become more common they become more acceptable and their cost is lowered a third externality that between firms and inspectors is the source of the perverse effect more cheating by firms is good for bribe taking inspectors and more bribe taking inspectors are good for cheating firms

a dynamic model of corruption deterrence abstract this paper presents a model of corruption deterrence with a simple overlapping generations structure built into it a crucial assumption is that when corruption becomes more prevalent in the economy it is harder to audit a corrupt official effectively it is shown that this assumption may give rise to several stationary equilibrium levels of corruption this possibility has been exploited to explain why sometimes a government may temporarily resort to an extremely severe deterrence policy and why the same deterrence scheme may imply quite different levels of corruption a case study is provided to give empirical support to the model

on the elements and practices of monitoring abstract politicians and businessmen have to address the principal agent problem whenever delegation of power occurs installing a monitoring scheme may help to ensure that the officers perform the desired functions checks and balances are the theme in the political arena while management and control are the routines in the business world throughout history numerous monitoring networks have been deployed to overcome the difficulties comparing how those monitoring networks solved the controlling issues may shed light on the incentive structures embodied furthermore the evolution of institutions and organizations could be discerned via the changes in incentives

bureaucratic corruption and the rate of temptation do wages in the civil service affect corruption and by how much abstract this paper presents what is to our knowledge the first empirical estimate of the effect of pay in the civil service on corruption first we show that theory is ambiguous on the relationship between civil service pay and corruption then we examine the issue using a new data set on wages for low income countries we find evidence of a statistically and economically significant relationship between relative civil service pay and corruption in regressions based on cross country averages where we control for a wide array of variables the relationship implies that a rather large increase in wages is required to eradicate corruption solely by raising wages

a model of bureaucracy and corruption we analyze bureaucracy and corruption in a market with decentralized exchange and lemons exchange is modeled as a sequence of bilateral random matches agents have private information about the quality of goods they produce and can supplement trade with socially inefficient bribes bureaucracy is modeled as a group of agents who enjoy centralized production and consumption transaction patterns between the bureaucracy and the private sector are fully endogenous centralized production and consumption in the bureaucracy give rise to low power incentives for the individual bureaucrats as a result private agents might bribe bureaucrats whereas they do not bribe each other an equilibrium with corruption and an equilibrium without corruption can coexist we discuss some welfare implications of the model

propensities to engage in and punish corrupt behavior experimental evidence from australia india indonesia and singapore abstract this paper examines cultural differences in individual decision making in a corruption game we define culture as an individual s accumulated experience shaped by the social institutional and economic aspects of the environment in which the individual lives based on experiments run in australia melbourne india delhi indonesia jakarta and singapore we find that there is a greater variation in the propensities to punish corrupt behavior than in the propensities to engage in corrupt behavior across cultures consistent with the existing corruption indices the subjects in india exhibit a higher tolerance of corruption than the subjects in australia however the subjects in singapore have a higher tolerance and the subjects in indonesia have much lower tolerance of corruption than expected we conjecture that this is due to the nature of the recent institutional changes in these two countries we also vary our experimental design to examine the impact of the perceived cost of bribery and find that the results are culture specific

corruption tax evasion and the laffer curve in a corrupt tax administration a rise in tax ratesets off complicated strategic moves by both taxpayersand administrators it is shown that in somecircumstances this may bring about laffer likebehavior of overall tax revenue i e a higher taxrate results in smaller net revenue for thegovernment further a more intense tax effort byincreasing the number of returns audited may alsoreduce net revenues finally if tax and fine ratespositively influence the level of corruption in theadministration these outcomes become more likely

the king can do no wrong on the criminal immunity of leaders abstract in its recent anti corruption campaign china removed the criminal immunity originally enjoyed by its leaders absent fundamental changes in the political institution in which incumbent leaders instead of citizens at large select the next leaders such a partial reform pays off only if i it takes place at the right time ii it goes easy on corrupt low rank officials and iii the government is reasonably centralized failing any of these such a partial reform would lead to rampant corruption throughout the government hierarchy an outcome far worse than retaining leader immunity

persistence of corruption some theoretical perspectives summary the paper examines how pervasive corruption can be persistent despite the presence of anti corruption measures and incentives corruption has a strong tendency to persist in the first part we discuss how a high level of corruption or a low level of compliance can be an equilibrium outcome in such a case corruption becomes the social norm in the second part of the paper we use ides from evolutionary game theory to discuss how corrupt behavior can be immune to interventions and it can sustain itself against different individual behavioral norms

how corruptible are you bribery under uncertainty abstract we model corruption in a society as a result of bargaining for bribes between private citizens and public officials we investigate the role that incomplete information with respect to the intrinsic moral cost of one s potential corruption partner plays out in his or her propensity to engage in bribery and consequently the equilibrium level of corruption in the society we assume that the cost of engaging in corruption is subject to strategic complementarities which may lead to multiple corruption equilibria we find that corruption is lowest when potential bribers and potential bribees are uncertain regarding each other s corruptibility and have asymmetric bargaining powers our uncertainty result provides theoretical support in favor of anti corruption strategies such as staff rotation in public offices aimed at decreasing the social closeness of bribers and bribees our bargaining power result suggests that under uncertainty monopolistic public good provision has the same corruption reducing effect as competitive public good provision

theory of the firm in short run industry equilibrium a number of economists have studied the long run input behavior eugene silberberg 1974a lowell bassett and thomas borcherding 1 970a b c c e ferguson and thomas saving and paul meyer 1967 of a competitive industry in which entry or exit continues until industry output price moves to the minimum average cost of the marginal firm in the industry however this analysis requires very strong assumptions which severely restrict diversity between firms silberberg 1974a for example assumes all firms production functions are identical except for a scale factor complementary to these long run investigations i will present a compact but thorough analysis of the short run case in which technology and the number of firms are fixed but industry output price responds to aggregate supply changes of existing firms resulting from changes in factor prices in contrast to the long run analysis no assumptions limiting interfirm diversity nor any other restrictions beyond definition of the usual neoclassical firm are needed furthermore results are obtained for industry factor demand which do not necessarily hold for individual firms when they respond to factor prices jointly with other firms in the industry this contradicts the older methodology associated with paul samuelson 1947 in which factor demand responses are derived for firms acting in isolation from each other and their isolated responses are aggregated to obtain the industry factor response for example traditional theory shows input response obeys the law of demand for isolated firms but this standard result no longer holds when a firm adjusts within a larger industry of firms whose collective output response can affect output price thus the law of demand for industry factor behavior cannot be established by aggregation of isolated firm responses however its validity does nevertheless hold in the short run in which the number of firms in the industry is constant therefore the purpose of this paper is to characterize the short run industry level factor demand implications and to show how these implications relate to the traditional theory of isolated firm behavior in addition it is briefly shown how these short run results also imply that the law of demand is likely to hold even in the long run where entry and exit from the industry can occur even for an industry of quite dissimilar firms given the well established literature of the standard neoclassical firm the main body of the paper will confine presentation to required definitions and the statement plus interpretation of the main results all proofs and derivations are reserved for the appendix

mental health expenditure in england a spatial panel approach we empirically investigate the determinants of local authority mental health expenditure in england we adopt a reduced form demand and supply model extended to incorporate possible interaction among authorities as well as unobserved heterogeneity the model is estimated using an annual panel dataset that allows us to explore both time series and cross municipality variation in mental health expenditure results are consistent with some degree of interdependence between neighbouring municipalities in spending decisions this first attempt to apply spatial panels in investigating health expenditure offers insights and raises new questions