Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/180611
Authors: 
Bennett, John
Rablen, Matthew D.
Year of Publication: 
2018
Series/Report no.: 
IZA Discussion Papers No. 11593
Abstract: 
We analyze the provision of infrastructure by a foreign investor when the domestic bureaucracy is corrupt, but puts some weight on domestic welfare. The investor may pay a bribe in return for a higher provisional contract price. After the investment has been sunk, the bureaucracy may hold up the investor, using the threat of expropriation to demand a lower final price or another bribe. Depending on the level of care for domestic welfare, greater bureaucratic centralization may increase or decrease domestic welfare. Because of the threat of hold-up, bribery may result in greater domestic welfare than the honest benchmark does.
Subjects: 
bribery
hold-up
renegotiation
bureaucratic structure
centralized bureaucracy
decentralized bureaucracy
JEL: 
D73
H11
Document Type: 
Working Paper

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