Collusion in Government and Corruption

Abstract

Politicians require bureaucrats to implement policies. Due to information asymmetry about who is to be considered a beneficiary of policy screening devices like red tape are used. This results in opportunism by individuals to portray themselves as deserving beneficiaries of policies and discretion in the hands of the bureaucrat. Bureaucrats and individuals collude to conceal information and transact in bribes. Politicians also collude with bureaucrats and use transfers or postings to reveal the value of bribes transacted. Collusion makes the separation of powers ineffective in providing checks and balances. Public monitoring by the press and civil society then remains the most effective way to deter corruption. Corruption is not so much due to the culture of greed and the dispassionate pursuit of self interest, or due to wrong policies such as low wages in the public sector, but stems from the inherent design of non-market institutions set up to promote the social good.