University of Leicester
Browse
dp05-16.pdf (808.39 kB)

Corruption And The Provision Of Public Output In A Hierarchical Asymmetric Information Relationship

Download (808.39 kB)
report
posted on 2009-05-11, 15:37 authored by Dhami Sanjit, Ali al-Nowaihi
This paper develops a hierarchical principal-agent model to explore the influence of corruption, bribery, and politically provided oversight of production on the efficiency and level of output of some publicly provided good. Under full information, an honest politician acheives the first best while a dishonest politician creates shortages and bribes. Under asymmetric information, however, an honest politician might create more shortages relative to a dishonest one, although, the latter creates greater bribes. Furthermore, the contracted output can be greater or smaller relative to that produced by an unregulated private monopolist. The model identifies a tradeoff between bribery and allocative efficiency. This helps to reconcile some conflicting results on the implications of corruption for the size of the public sector and provides new results on the circumstances under which an improvement in the auditing technology is beneficial. Relative to the static case, in the dynamic renegotiation-proof equilibrium, shortages fall but bribes can increase or decrease, raising important issues of the choice between long-term and short-term contracts.

History

Publisher

Dept. of Economics, University of Leicester

Available date

2009-05-11

Publisher version

http://www.le.ac.uk/economics/research/discussion/papers2005.html

Book series

Discussion Papers in Economics;05/16

Language

en

Usage metrics

    University of Leicester Publications

    Categories

    Exports

    RefWorks
    BibTeX
    Ref. manager
    Endnote
    DataCite
    NLM
    DC