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Intermediaries between Private Sector and the Government: Helping Business or Participating in Corruption?

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  • L. Polishchuk
  • O. Shchetinin
  • O. Shestoperov

Abstract

The paper explores economic implications of the presence of intermediaries assisting private individuals and firms in meeting government rules and regulations. Conventional advantages of intermediaries include gains due to specialization and the economy of scale; however if government service is affected by corruption, intermediaries in addition allow to reduce "transaction costs" of corrupt agreements and in particular - the risks of exposure of such illicit dealings. It is shown that in such circumstances intermediaries benefit corrupt bureaucracy, possibly at the expense of the private sector. Results of surveys conducted in recent years are used in describing the present state and trends in the intermediaries sector in Russia, and evidence is presented that some intermediaries indeed resort to corruption in serving their clients. The link between the intermediaries sector dynamics and deregulation and administrative reform is analyzed.

Suggested Citation

  • L. Polishchuk & O. Shchetinin & O. Shestoperov, 2008. "Intermediaries between Private Sector and the Government: Helping Business or Participating in Corruption?," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 3.
    • Handle: RePEc:nos:voprec:y:2008:id:1280
    DOI: 10.32609/0042-8736-2008-3-106-123
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