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Absolute Power Corrupts Absolutely?: A Political Agency Theoretic Approach

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  • Banerjee, Swapnendu
  • Saha, Soumyarup

Abstract

We explore a power relationship between a ‘corrupt’ politician and a political worker where the politician can order an illegal corrupt effort to be performed by the worker. Using a moral hazard structure we show that when the politician’s power is sufficiently high the politician optimally uses power and relies less on wage incentives. But when the power is low, the politician optimally shuns power and relies more on wage incentives. We also talk about optimal bolstering of power through threats depending on the level of power of the politician. This model has implications on the larger principal-agent structure, although we model it as a political corruption game.

Suggested Citation

  • Banerjee, Swapnendu & Saha, Soumyarup, 2024. "Absolute Power Corrupts Absolutely?: A Political Agency Theoretic Approach," MPRA Paper 121109, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:121109
    as

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    File URL: https://mpra.ub.uni-muenchen.de/121109/1/MPRA_paper_121109.pdf
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    References listed on IDEAS

    as
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    5. Durham, Yvonne & Hirshleifer, Jack & Smith, Vernon L., 2008. "The Paradox of Power," Handbook of Experimental Economics Results, in: Charles R. Plott & Vernon L. Smith (ed.), Handbook of Experimental Economics Results, edition 1, volume 1, chapter 16, pages 127-137, Elsevier.
    6. Mookherjee, Dilip & Png, I P L, 1995. "Corruptible Law Enforcers: How Should They Be Compensated?," Economic Journal, Royal Economic Society, vol. 105(428), pages 145-159, January.
    7. Lundberg, Shelly & Pollak, Robert A, 1994. "Noncooperative Bargaining Models of Marriage," American Economic Review, American Economic Association, vol. 84(2), pages 132-137, May.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Power; Corruption; Hidden Action; Perception; Bolstering;
    All these keywords.

    JEL classification:

    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • J47 - Labor and Demographic Economics - - Particular Labor Markets - - - Coercive Labor Markets
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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