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Choosing Agents and Monitoring Consumption: A note on Wealth as a Corruption‐Controlling Device

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  • Rafael Di Tella
  • Federico Weinschelbaum

Abstract

There are a large number of cases where corruption has been discovered when investigating levels of consumption that appear to be hard to justify. The informativeness of an agent's level of consumption depends on his legal income and initial level of wealth, as conspicuous consumption by wealthy agents leads to little updating of the principal's belief about their honesty. This introduces a tendency to prefer poor agents as they are easier to monitor. More generally, we describe the basic problem of choosing agents and monitoring consumption with the aim of reducing corruption, and discuss features of the practical applications.

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  • Rafael Di Tella & Federico Weinschelbaum, 2008. "Choosing Agents and Monitoring Consumption: A note on Wealth as a Corruption‐Controlling Device," Economic Journal, Royal Economic Society, vol. 118(532), pages 1552-1571, October.
    • Handle: RePEc:wly:econjl:v:118:y:2008:i:532:p:1552-1571
    DOI: 10.1111/j.1468-0297.2008.02180.x
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    Cited by:

    1. Foltz, Jeremy & Li, Kangli, 2023. "Competition and corruption: Highway corruption in West Africa," Journal of Development Economics, Elsevier, vol. 163(C).
    2. Simona Fabrizi & Steffen Lippert, 2017. "Corruption and the public display of wealth," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 19(4), pages 827-840, August.
    3. Foltz, Jeremy D. & Li, Kangli, 2020. "Bargain to Extort: Spatial Allocation of Checkpoints and Highway Corruption in West Africa," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304449, Agricultural and Applied Economics Association.
    4. Abhijit Banerjee & Rema Hanna, 2012. "Corruption [The Handbook of Organizational Economics]," Introductory Chapters,, Princeton University Press.
      • Hanna, Rema N. & Mullainathan, Sendhil & Banerjee, Abhijit, 2012. "Corruption," Scholarly Articles 8830779, Harvard Kennedy School of Government.
      • Abhijit Banerjee & Rema Hanna & Sendhil Mullainathan, 2012. "Corruption," Working Papers id:4952, eSocialSciences.
      • Abhijit Banerjee & Sendhil Mullainathan & Rema Hanna, 2012. "Corruption," NBER Working Papers 17968, National Bureau of Economic Research, Inc.
      • Banerjee, Abhijit & Hanna, Rema & Mullainathan, Sendhil, 2012. "Corruption," Working Paper Series rwp12-023, Harvard University, John F. Kennedy School of Government.
    5. Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2010. "Disclosure by Politicians," American Economic Journal: Applied Economics, American Economic Association, vol. 2(2), pages 179-209, April.
    6. Rodrigues-Neto, José A., 2014. "On corruption, bribes and the exchange of favors," Economic Modelling, Elsevier, vol. 38(C), pages 152-162.
    7. Pablo Zárate, 2021. "Signaling corruption through conspicuous consumption," Young Researchers Working Papers 2, Universidad de San Andres, Departamento de Economia, revised Oct 2022.
    8. Marko Klašnja, 2016. "Increasing rents and incumbency disadvantage," Journal of Theoretical Politics, , vol. 28(2), pages 225-265, April.
    9. Antoinette Schoar, 2019. "Comment on "Special Deals with Chinese Characteristics "," NBER Chapters, in: NBER Macroeconomics Annual 2019, volume 34, pages 389-394, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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