Competition in Bureaucracy and Corruption Articles uri icon



publication date

  • July 2010

start page

  • 107

end page

  • 114


  • 2


  • 92

International Standard Serial Number (ISSN)

  • 0304-3878

Electronic International Standard Serial Number (EISSN)

  • 1872-6089


  • This paper studies the consequences of introducing competition between bureaucrats. Bureaucrats are supposed to grant licences to firms that satisfy certain requirements. Firms have to
    invest into satisfying these requirements. Some bureaucrats are corrupt,
    that is, they give the licence to any firm in exchange for a bribe.
    Some firms prefer to buy the licence rather than to invest and satisfy
    the requirements imposing negative externalities on the society. The
    competition regime is found to create more ex ante incentives for firms
    to invest while the monopoly regime is better at implementing ex post
    allocation, that is, distributing the licences given the firms'
    investment decisions. Additional results on the effects of
    intermediaries, staff rotation, punishments and endogenous entry to the
    bureaucracy are provided.