This paper analyzes the effect of anti-corruption policies in a framework that accounts for the impact of changes in market structure on the incentive structure of bureaucrats in charge of inspecting firms. In this context, potentially adverse consequences of standard anti-corruption policies, including monitoring and random audit, education campaigns and the introduction of competition, which may result in more equilibrium corruption, are discussed. Finally, it is shown that while the total social cost of corruption may be increasing, these policies are always welfare improving, even when they lead to more corruption.
Review of Industrial Organization – Springer Journals
Published: Oct 1, 2009
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