A BEJEAP Contributions article.

Abstract

This paper analyzes corruption as a collusive act which requires the participation of two willing partners. An agent intending to engage in a corrupt act must search for a like-minded partner. When many people in the economy are corrupt, such a search is more likely to be fruitful. Thus when an agent engages in a search, he raises the net benefit of searching for other similar agents in the economy, creating an externality. This introduces a non-convexity in the model, which consequently has multiple equilibria. The economy can be in stable equilibrium with a high or low level of corruption.

Starting from the high-corruption equilibrium, a sufficient increase in vigilance triggers a negative cascade, leading the economy to a new equilibrium in which no agent finds it profitable to search for corrupt partners. The no-corruption equilibrium continues to be stable if vigilance is then relaxed. This suggests that the correct way to deal with corruption is to launch a ``big push'' with large amounts of resources. Once the level of corruption declines, these resources can be withdrawn.

Submitted: November 29, 2007 · Accepted: March 21, 2008 · Published: April 28, 2008

Recommended Citation

Nabin, Munirul Haque and Bose, Gautam (2008) "Partners in Crime: Collusive Corruption and Search," The B.E. Journal of Economic Analysis & Policy: Vol. 8 : Iss. 1 (Contributions), Article 9.
Available at: http://www.bepress.com/bejeap/vol8/iss1/art9