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Organized vs. Competitive Corruption

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  • Marco Celentani
  • Juan-José Ganuza

Abstract

We study bureaucratic corruption in a model in which a constituency sets required levels for a given set of activities. Each activity is carried out by an external provider and its realization is supervised by a bureaucrat. Bureaucrats are supposed to act on behalf of the constituency, but they can allow providers to deliver lower activity levels than contracted in exchange for a bribe. Given this, the constituency sets the optimal activity levels weighing off the value of activity levels, their costs, as well as the possibility for the bureaucrats to be corrupt. We use this setup to study the impact on equilibrium corruption of the degree of decentralization of corruption. To do this we compute equilibrium corruption in two different settings: (1) Each bureaucrat acts in such a way as to maximize his own individual utility (competitive corruption); (2) An illegal syndicate oversees the corruption decisions of the population of bureaucrats in such a way as to maximize total proceeds from corruption (organized corruption). We show that the illegal syndicate acts in such a way as to restrain the total number of corrupt transactions and corruption is lower when it is organized than when it is competitive. Copyright Kluwer Academic Publishers 2002

Suggested Citation

  • Marco Celentani & Juan-José Ganuza, 2002. "Organized vs. Competitive Corruption," Annals of Operations Research, Springer, vol. 109(1), pages 293-315, January.
    • Handle: RePEc:spr:annopr:v:109:y:2002:i:1:p:293-315:10.1023/a:1016364505439
    DOI: 10.1023/A:1016364505439
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    5. Celentani, Marco & Ganuza, Juan-Jose, 2002. "Corruption and competition in procurement," European Economic Review, Elsevier, vol. 46(7), pages 1273-1303, July.
    6. Mauro, Paolo, 1998. "Corruption and the composition of government expenditure," Journal of Public Economics, Elsevier, vol. 69(2), pages 263-279, June.
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    8. Jack High (ed.), 2001. "Competition," Books, Edward Elgar Publishing, number 1751.
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    10. Rafael Di Tella & Alberto Ades, 1999. "Rents, Competition, and Corruption," American Economic Review, American Economic Association, vol. 89(4), pages 982-993, September.
    11. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
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    Citations

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    Cited by:

    1. Uberti, Luca J., 2022. "Corruption and growth: Historical evidence, 1790–2010," Journal of Comparative Economics, Elsevier, vol. 50(2), pages 321-349.
    2. Blackburn, Keith & Forgues-Puccio, Gonzalo F., 2009. "Why is corruption less harmful in some countries than in others?," Journal of Economic Behavior & Organization, Elsevier, vol. 72(3), pages 797-810, December.
    3. Reyes Calderón & José Luis à lvarez Arce, 2007. "Corruption, Complexity and Governance," Faculty Working Papers 11/07, School of Economics and Business Administration, University of Navarra.
    4. Ariane Lambert‐Mogiliansky & Konstantin Sonin, 2006. "Collusive Market Sharing and Corruption in Procurement," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(4), pages 883-908, December.
    5. Roy Cerqueti & Raffaella Coppier, 2016. "A game theoretical analysis of the impact of income inequality and ethnic diversity on fiscal corruption," Annals of Operations Research, Springer, vol. 243(1), pages 71-87, August.
    6. Keith Blackburn & Gareth Downing, 2015. "Deconcentration, Corruption and Economic Growth," Centre for Growth and Business Cycle Research Discussion Paper Series 209, Economics, The University of Manchester.
    7. Leandro Arozamena & Juan José Ganuza & Federico Weinschelbaum, 2024. "Corruption and Renegotiation in Procurement," Working Papers 334, Red Nacional de Investigadores en Economía (RedNIE).
    8. Celentani, Marco & Ganuza, Juan-Jose, 2002. "Corruption and competition in procurement," European Economic Review, Elsevier, vol. 46(7), pages 1273-1303, July.
    9. Keith Blackburn & Yuanyuan Wang, 2009. "Uncertainty, Entrepreneurship and the Organisation of Corruption," Centre for Growth and Business Cycle Research Discussion Paper Series 133, Economics, The University of Manchester.
    10. Pierre-Henri Morand & François Marechal, 2023. "Achats publics responsables et achat local : enseignements des données ouvertes françaises," Post-Print hal-03842464, HAL.
    11. Ariane Lambert‐Mogiliansky & Konstantin Sonin, 2006. "Collusive Market Sharing and Corruption in Procurement," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(4), pages 883-908, December.

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    More about this item

    Keywords

    competitive and organized corruption; institutional response;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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