Who gains from non-collusive corruption?

R. Foellmi, M.C. Oechslin

Research output: Contribution to journalArticleScientificpeer-review

31 Citations (Scopus)

Abstract

Non-collusive corruption, i.e., corruption that imposes an additional burden on business activity, is particularly widespread in low-income countries. We build a macroeconomic model with credit market imperfections and heterogeneous agents to explore the roots and consequences of this type of corruption. We find that credit market imperfections, by generating rents for the incumbent entrepreneurs, create strong incentives for corrupt behavior by state officials. However, non-collusive corruption not only redistributes income from non-officials towards officials but also within the group of potential entrepreneurs. If borrowing is limited, bribes prevent poorer but talented individuals from starting a business. But this is likely to benefit those who may enter anyway; the cost of capital is lower and there is less competition on the goods markets.
Original languageEnglish
Pages (from-to)95-119
JournalJournal of Development Economics
Volume82
Issue number1
DOIs
Publication statusPublished - Jan 2007
Externally publishedYes

Keywords

  • Corruption
  • Income inequality
  • credit market imperfections
  • development

Fingerprint Dive into the research topics of 'Who gains from non-collusive corruption?'. Together they form a unique fingerprint.

Cite this