This paper provides a simple model of corruption dynamics with the ratchet effect. As in Shleifer and Vishny [1993], we consider the sale of government property (entry permit) by government officials as the prototype of corruption activities. In a dynamic version of the Shleifer-Vishny model,...

This paper develops a simple framework to analyze the links between corruption and the unofficial economy and their implications for the official economy. In a model of self-selection with heterogeneous entrepreneurs, we show that the entrepreneurs' option to flee to the underground economy...

This paper develops a simple framework to analyze the links between corruption and the unofficial economy and their implications for the official economy. In a model of self-selection with heterogeneous entrepreneurs, we show that the entrepreneurs' option to flee to the underground economy...

This paper provides a simple model of corruption dynamics with the ratchet effect. As in Shleifer and Vishny (1993), we consider the sale of government property (entry permit) by government officials as the prototype of corruption activities. In a dynamic version of the Shleifer-Vishny model,...

Corrupt arrangements are characterized by a high risk of opportunism. Moreover, denunciation and extortion add another layer of uncertainty for participants in corrupt transactions. This paper demonstrates how legislators can use an asymmetric design of criminal sanctions to amplify these...

This paper argues that contracts induced by means of bribery should be valid. Nullity and voidability decrease the incentive for voluntary disclosure, assist corrupt actors with enforcing their bribe agreements and provide leeway for abuse. Thus, they run counter to effective anti-corruption. It...