Corrupt officials can use their positions to enrich themselves in two ways. They can steal from the state budget--embezzling or misspending funds--or they can demand extra payments from citizens in return for services--bribery. In many circumstances, embezzlement is less distortionary than...

Corrupt officials can use their positions to enrich themselves in two ways. They can steal from the state budget--embezzling or misspending funds--or they can demand extra payments from citizens in return for services--bribery. In many circumstances, embezzlement is less distortionary than...

This paper argues that, given the legacy of Chinese communism and its political structure, corruption, together with the threat of punishment for corruption and the selective enforcement of this threat, serves as a method of compensation that both satisfies the political objectives of the...