Abstract
We consider two forms of corruption – collusion and extortion – and examine their impact in the context of a common enforcement problem. Collusion, where the citizen or firm and the enforcement officer collude, leads to a dilution of enforcement and compliance incentives. Extortion also has a similar dilution of compliance incentives, as the complaints are subject to possible harassment and extortion. We explore how optimal policies may differ substantially in the presence of such corruption possibilities. We show that in some situations the planner may optimally choose to overenforce when faced with corrupt officers. Overenforcement refers to a case of preventing an agent from choosing an action even when the private benefits from the action exceed social costs.
Original language | English |
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Title of host publication | The Political Economy of Corruption |
Editors | Chandan Jha, Ajit Mishra, Sudipta Sarangi |
Place of Publication | London |
Publisher | Taylor and Francis |
Chapter | 5 |
Number of pages | 13 |
Edition | 1st |
ISBN (Electronic) | 9781003142300 |
Publication status | E-pub ahead of print - 4 May 2023 |