The efficiency implications of corruption

Abstract

Corruption has different efficiency effects across countries. Conventional economic models of corruption are shown to be deficient in explaining these differences. Instead the article suggests that the distribution of power within the patron-client networks in which corruption is taking place is an important variable explaining the differences in the efficiency effects of corruption. Where patrons are powerful the range of rights transacted is limited and the allocation is likely to be efficiency maximizing. In contrast where patrons are weak the range of rights transacted is likely to be much wider with the rights allocated according to political calculations with large efficiency costs.

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