The Choice Between Market Failures and Corruption

Bibliographic Data

ID19600463
AuthorsDaron Acemoglu (0000-0003-0908-7491, Massachusetts Institute of Technology), Thierry Verdier (0000-0002-9701-7815, DELTA-ENS, 48, Boulevard Jourdan, Paris 75405, France, and CERAS.)
Year2000
Volume90
Issue1
Pages194-211
Publication date2000-03-01
Peer ReviewedYes
Open AccessNo
TypeARTICLE
VenueAmerican Economic Review (JOURNAL)
Journal identifiersISSN: 0002-8282 • E-ISSN: 1944-7981
PublisherAmerican Economic Association (PUBLISHER • US)
DOI10.1257/aer.90.1.194
OpenAlexW2095331327
LanguageEN
Citations received125
References cited12

Because government intervention transfers resources from one party to another, it creates room for corruption. As corruption often undermines the purpose of the intervention, governments will try to prevent it. They may create rents for bureaucrats, induce a misallocation of resources, and increase the size of the bureaucracy. Since preventing all corruption is excessively costly, second-best intervention may involve a certain fraction of bureaucrats accepting bribes. When corruption is harder to prevent, there may be both more bureaucrats and higher public-sector wages. Also, the optimal degree of government intervention may be nonmonotonic in the level of income. (JEL D23, H40)

Bureaucracy · Economic interventionism · Economic rent · Economics · Government (linguistics) · Intervention (counseling) · Labour economics · Language change · Market failure · Microeconomics · Politics · Public economics · Rent-seeking · Corruption and Economic Development · Crime, Illicit Activities, and Governance · Law, Economics, and Judicial Systems

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