We review microeconomic research on corruption from the last thirty years. We
start by analyzing the seminal models of corruption built on three-tier, delegation
models. Then, go into more details of the context of corrupt deals, and discuss the
main economic factors that a¤ect corruption. We discuss incentives and compensation
in bureaucracies, and the interplay of market and bureaucratic structure. Competition
and contract design will also be reviewed in relation to procurement under corruptible
agents. ...
We review microeconomic research on corruption from the last thirty years. We
start by analyzing the seminal models of corruption built on three-tier, delegation
models. Then, go into more details of the context of corrupt deals, and discuss the
main economic factors that a¤ect corruption. We discuss incentives and compensation
in bureaucracies, and the interplay of market and bureaucratic structure. Competition
and contract design will also be reviewed in relation to procurement under corruptible
agents. After reviewing the theoretical contributions, we turn to the empirical evidence.
We begin discussing measurement issues, and then move to the analysis of the
empirical evidence relative to the theoretical models discussed in previous sections.
Finally, we cover several anti-corruption mechanisms proposed in the literature and
discuss their relative merits as devices to control or eliminate illegal activities.
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