Corruption and Optimal Enforcement

Research output: Chapter or section in a book/report/conference proceedingChapter or section

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 languageEnglish
Title of host publicationThe Political Economy of Corruption
EditorsChandan Jha, Ajit Mishra, Sudipta Sarangi
Place of PublicationLondon
PublisherTaylor and Francis
Chapter5
Number of pages13
Edition1st
ISBN (Electronic)9781003142300
Publication statusE-pub ahead of print - 4 May 2023

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