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Intermediation in corruption markets

Intermediation in corruption markets Purpose – Consider a government benefit that is earmarked for a group of people “deserving” the benefit. Corruption happens when undeserving candidates obtain the benefit with the help of corrupt officials. Often, such corrupt activities are mediated by professional touts who act as intermediaries between the undeserving candidates and the corrupt officials. The purpose of this paper is to analyze the equilibrium in such an intermediated market. Design/methodology/approach – A queuing model was theoretically analyzed where candidates wait in line to obtain the benefit. Undeserving candidates can also obtain the service – in exchange for a bribe – if they happen to wait at a counter with a corrupt clerk. The intermediary collects information to find out which clerks are corrupt, and charges a fee to direct candidates to an honest or corrupt clerk, as the candidate may choose. Findings – In a market with a single intermediary we show that, under fairly general conditions: the intermediary is active; both deserving and undeserving candidates use the service of the intermediary; welfare in an economy with an intermediary is lower than that in an economy without intermediaries; and under some conditions, an optimal response to corruption is to reduce the number of officials dispensing the benefit. Originality/value – This paper provides a framework within which intermediated markets for corruption can be analysed. The framework is easy to adapt and can accommodate social costs other than waiting costs. The conclusion suggests more complex scenarios that may be analysed using the approach in this model. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Indian Growth and Development Review Emerald Publishing

Intermediation in corruption markets

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Publisher
Emerald Publishing
Copyright
Copyright © 2009 Emerald Group Publishing Limited. All rights reserved.
ISSN
1753-8254
DOI
10.1108/17538250910953453
Publisher site
See Article on Publisher Site

Abstract

Purpose – Consider a government benefit that is earmarked for a group of people “deserving” the benefit. Corruption happens when undeserving candidates obtain the benefit with the help of corrupt officials. Often, such corrupt activities are mediated by professional touts who act as intermediaries between the undeserving candidates and the corrupt officials. The purpose of this paper is to analyze the equilibrium in such an intermediated market. Design/methodology/approach – A queuing model was theoretically analyzed where candidates wait in line to obtain the benefit. Undeserving candidates can also obtain the service – in exchange for a bribe – if they happen to wait at a counter with a corrupt clerk. The intermediary collects information to find out which clerks are corrupt, and charges a fee to direct candidates to an honest or corrupt clerk, as the candidate may choose. Findings – In a market with a single intermediary we show that, under fairly general conditions: the intermediary is active; both deserving and undeserving candidates use the service of the intermediary; welfare in an economy with an intermediary is lower than that in an economy without intermediaries; and under some conditions, an optimal response to corruption is to reduce the number of officials dispensing the benefit. Originality/value – This paper provides a framework within which intermediated markets for corruption can be analysed. The framework is easy to adapt and can accommodate social costs other than waiting costs. The conclusion suggests more complex scenarios that may be analysed using the approach in this model.

Journal

Indian Growth and Development ReviewEmerald Publishing

Published: Apr 17, 2009

Keywords: Corruption; Social welfare; Social benefits; Intermediaries

References