Corruption In Public Procurement And Social Welfare

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dc.contributor.author Toukan, Amjad
dc.date.accessioned 2017-07-13T10:36:12Z
dc.date.available 2017-07-13T10:36:12Z
dc.date.copyright 2017 en_US
dc.date.issued 2017-07-13
dc.identifier.issn 0022-037X en_US
dc.identifier.uri http://hdl.handle.net/10725/5910 en_US
dc.description.abstract There are several reasons why a firm would want to pay a bribe to a high-level official when bidding for a large scale project. One reason is to induce the corrupt official and/or his agent to manipulate their evaluation of contract proposals in favor of the firm. In my analysis, I am examining the case where a firm competes to win a government contract. To win the award, the firm may choose to comply with a demand by the corrupt government official for a share of the value of the project to avoid being excluded from trade. The contribution of my paper is that it models the competition between the firm and the corrupt official as a contest where the corrupt official is expending costly efforts in trying to expropriate part of the value of the public project and the firm is also expending costly efforts in trying to protect its profits. Contests have been used to analyze lobbying, rent-seeking, advertising, litigation, arms races, and sports events. A contest is a game in which players exert costly effort in order to win a certain prize. The players' probabilities of winning the prize are determined by the use of a probabilistic choice function that depends on the efforts of adversaries. I incorporate the preferences of the corrupt official and the enforcement of property rights in my model where I am able to shed some light on the impact of these two important variables on social welfare. My results show that with complete information and no corruption, the economy will arrive at an equilibrium that is socially optimal in the sense that social welfare is maximized. In this case the public procurement project will be awarded to the firm that provides the competitive world quality at the competitive world price. In the case of complete information and corruption, my results show that corrupt officials' preferences towards corruption in countries with weak enforcement of property rights play an essential role in determining whether we will arrive at an equilibrium that is socially optimal. I argue that in such countries aligning the incentives of corrupt government officials with that of society is necessary in combating corruption and plays a more important role than strengthening the enforcement of property rights. en_US
dc.language.iso en en_US
dc.title Corruption In Public Procurement And Social Welfare en_US
dc.type Article en_US
dc.description.version Published en_US
dc.author.school SOB en_US
dc.author.idnumber 200904980 en_US
dc.author.department Department of Economics (ECON) en_US
dc.description.embargo N/A en_US
dc.relation.journal The Journal of Developing Areas en_US
dc.journal.volume 51 en_US
dc.journal.issue 2 en_US
dc.article.pages 315-327 en_US
dc.keywords Corruption en_US
dc.keywords Public procurement en_US
dc.keywords Social welfare en_US
dc.keywords Contest functions en_US
dc.identifier.doi https://doi.org/10.1353/jda.2017.0047 en_US
dc.identifier.ctation Toukan, A. (2017). Corruption In Public Procurement And Social Welfare. The Journal of Developing Areas, 51(2), 315-327. en_US
dc.author.email amjad.toukan@lau.edu.lb en_US
dc.identifier.tou http://libraries.lau.edu.lb/research/laur/terms-of-use/articles.php en_US
dc.identifier.url https://muse.jhu.edu/article/657944/pdf en_US
dc.author.affiliation Lebanese American University en_US

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