Bribery, Hold-Up and Bureaucratic Structure

No 11593, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We analyze the provision of infrastructure by a foreign investor when the domestic bureaucracy is corrupt, but puts some weight on domestic welfare. The investor may pay a bribe in return for a higher provisional contract price. After the investment has been sunk, the bureaucracy may hold up the investor, using the threat of expropriation to demand a lower final price or another bribe. Depending on the level of care for domestic welfare, greater bureaucratic centralization may increase or decrease domestic welfare. Because of the threat of hold-up, bribery may result in greater domestic welfare than the honest benchmark does.

Keywords: centralized bureaucracy; bureaucratic structure; renegotiation; hold-up; bribery; decentralized bureaucracy (search for similar items in EconPapers)
JEL-codes: D73 H11 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2018-06
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Published - published in: Economic Inquiry, 2021, 53, 880-903

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Related works:
Journal Article: Bribery, hold‐up, and bureaucratic structure (2021)
Working Paper: Bribery, Hold-Up and Bureaucratic Structure (2018)
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