Corruption

In this paper, a new framework for analyzing corruption in public bureaucracies is provided. The standard way to model corruption is as an example of moral hazard, which then leads to a focus on better monitoring and stricter penalties with the eradication of corruption as the final goal. An alternative approach is proposed which emphasizes why corruption arises in the first place. Corruption is modeled as a consequence of the interaction between the underlying task being performed by bureaucrat, the bureaucrat's private incentives and what the principal can observe and control. This has helped in studying not just corruption but also other distortions that arise simultaneously with corruption, such as red-tape and ultimately, the quality and efficiency of the public services provided, and how these outcomes vary depending on the specific features of this task. The growing empirical literature on corruption is reviewed through this perspective and provide guidance for future empirical research. [BREAD Working Paper No. 329]. URL:[http://ipl.econ.duke.edu/bread/papers/working/329.pdf]