TY - JOUR
T1 - The dynamics of corruption with the ratchet effect
AU - Choi, Jay Pil
AU - Thum, Marcel
N1 - Copyright:
Copyright 2004 Elsevier Science B.V., Amsterdam. All rights reserved.
PY - 2003/3/1
Y1 - 2003/3/1
N2 - This paper provides a simple model of corruption dynamics with the ratchet effect. Corrupt officials have ex post the incentive to price discriminate entrepreneurs based on the entry decisions made in an earlier period. The inability of government officials to commit to future money demands induces entrepreneurs to delay entry in order to receive a discount in the permit price later. Even though the dynamic setting leaves the corrupt official with less extortion power, social welfare may decrease. We also explore the effect of the official's tenure stability on the extent of corruption. This allows us to identify circumstances under which the often observed practice of job rotation can help mitigate corruption.
AB - This paper provides a simple model of corruption dynamics with the ratchet effect. Corrupt officials have ex post the incentive to price discriminate entrepreneurs based on the entry decisions made in an earlier period. The inability of government officials to commit to future money demands induces entrepreneurs to delay entry in order to receive a discount in the permit price later. Even though the dynamic setting leaves the corrupt official with less extortion power, social welfare may decrease. We also explore the effect of the official's tenure stability on the extent of corruption. This allows us to identify circumstances under which the often observed practice of job rotation can help mitigate corruption.
UR - http://www.scopus.com/inward/record.url?scp=0038744287&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=0038744287&partnerID=8YFLogxK
U2 - 10.1016/S0047-2727(01)00149-9
DO - 10.1016/S0047-2727(01)00149-9
M3 - Article
AN - SCOPUS:0038744287
VL - 87
SP - 427
EP - 443
JO - Journal of Public Economics
JF - Journal of Public Economics
SN - 0047-2727
IS - 3-4
ER -