Discussion Paper Series in Economics, Department of Economics, Norwegian School of Economics (NHH)
Corruption and competition for resources.
() and Tina Søreide
Abstract: An increasing share of world FDI is carried out by
multinationals from developing countries. These investors may have
objectives and constraints that di¤er from their developed country
counterparts. In this paper we focus on differences in attitudes to
corruption, and how these may shape the competition for the right to
extract resources in a developing country context. We show how di¤erences
in the investors’ level of technology and differences in the host country
government's trade-o¤ between bribes and taxes determine who wins the
competition for the resource and the winning price. We …nd that the entry
of a corrupt investor may induce the honest investor to offer bribes
instead of taxes. Surprisingly, however, our analysis also demonstrates
that under some conditions, the entry of a corrupt investor may in fact
induce the honest investor to increase its tax payments.
Keywords: Corruption; FDI; auction; natural resources.; (follow links to similar papers)
JEL-Codes: K20; K40; O10; (follow links to similar papers)
17 pages, September 14, 2012
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