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On the relation between corruption and market competition
Author(s) -
Varvarigos Dimitrios,
Stathopoulou Eleni
Publication year - 2023
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.13113
Subject(s) - competition (biology) , language change , economics , construct (python library) , relation (database) , order (exchange) , government (linguistics) , microeconomics , public economics , finance , linguistics , philosophy , programming language , art , ecology , literature , database , computer science , biology
We construct a model where bureaucrats are corruptible, in the sense that they may accept bribes in order to mislead the authorities on the actual circumstances of firms that do not comply with a government regulation. We show that corruption increases the number of competing firms. We also show that increased competition (i) increases the likelihood that corruptible bureaucrats will actually transgress, and (ii) increases the bribe that corrupt bureaucrats will demand from each firm. These results are consistent with existing evidence showing a positive relation between competition and corruption, and that this causal relation operates in both directions.