SITE Working Paper Series
Bureaucracy intermediaries, corruption and red tape
Abstract: Intermediaries helping individuals and firms with the
government bureaucracy are common in developing countries. Although such
bureaucracy intermediaries are, anecdotally, linked with corruption and
welfare losses, few formal analyses exist.
In our model, a government
license can benefit individuals. We study individuals' net gain when
acquiring the license through the regular bureaucratic procedure, through
bribing or through intermediaries. For a given procedure, individuals using
intermediaries are better off than if intermediaries and corruption had not
existed. Intermediaries "grease the wheels". We then study incentives of
corrupt bureaucrats to create red tape. When free to choose levels of red
tape, bureaucrats implement more red tape and individuals are unambiguously
worse off in a setting with intermediaries than with "direct" corruption
Intermediaries can thus improve access to the bureaucracy, but
also strengthen incentives to create red tape - a potential explanation why
license procedures tend to be long in developing countries.
Keywords: Bureaucracy; Corruption; Intermediaries; Red tape; (follow links to similar papers)
JEL-Codes: D73; O12; (follow links to similar papers)
33 pages, July 14, 2010
The author now works at CRED - Centre for Research in Economic Development, University of Namur, Belgium (Information as of March, 2013). The paper has been revised, the new version is available as a CRED working paper at http://www.fundp.ac.be/eco/economie/recherche/wpseries/wp/1303.pdf.
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