Bureaucrats’ Corruption and Competition in Public Administration

Abstract Competition in public administration is often advocated as a solution to bureaucrats’ corruption. However, there are no well developed analyses of how competition could succeed and the issue of its detailed design has not been carefully addressed so far. In this paper, we put forward a series of models that help understand what competition in public administration can actually accomplish. We distinguish two different shapes that corruption may take: bribery and extortion, and we demonstrate, under the usual assumption of asymmetric information as to the honesty of the bureaucrats, that while competition is effective in fighting extortion it exacerbates bribery. Given that corruption normally manifests itself simultaneously under the two different shapes, an anti-corruption policy based upon competition is bound to face a serious trade-off: trying to curb one of them through competition implies making the other worse. This result holds, with some differences, under exogenous and endogenous bureaucrats’ ‘‘honesty’’. The dual aspect of corruption is probably one of the most serious—and so far largely neglected—obstacles to any effective anti-corruption policy.