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Economics of Governance

, Volume 20, Issue 1, pp 41–71 | Cite as

Corruption and paradoxes in alliances

  • Ricardo NievaEmail author
Original Paper

Abstract

In order to study corruption when a person can adjudicate over property rights, we extend the Tullock contest model by letting identical workers and a non-productive enforcer, who is more effective at fighting, contest over a resource. Property rights for output are well defined, but it is not so for the resource. If the enforcer assigns the resource in the way he was mandated, then the grand coalition forms with no corruption. There is corruption if he colludes with a subset of the workers and gets a transfer; this coalition then fights over the resource against other groups of workers. For general cost effort functions, if the enforcer is effective enough and marginal productivity of labor is adequately low, addition of the enforcer to a coalition increases the sum of payoffs of its members and generates negative externalities on other coalitions; that is, to divide and rule becomes an attractive prospect. This matches the empirical association between corruption and labor productivity or income inequality.

Keywords

Alliances Corruption Tullock contest Divide and rule 

JEL Classification

D72 D73 D74 

Notes

Acknowledgements

We thank Editor Amihai Glazer and the two referees involved for their very helpful comments. Thanks to Rosa Quispe for checking my results in the linear cost case.

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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Department of EconomicsUniversidad de LimaLimaPeru

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