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NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Federico Weinschelbaum

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June 2007Choosing Agents and Monitoring Consumption: A Note on Wealth as a Corruption-Controlling Device
with Rafael Di Tella: w13163
There are a large number of cases where corruption has been discovered investigating levels of consumption that appear to be hard to justify. Yet, in the standard moral hazard model withholding of effort by the agent is not observable to the principal. We argue that this assumption has to be revised in applications that study corruption. The informativeness of an agent's level of consumption depends on his legal income and initial level of wealth, as conspicuous consumption by wealthy agents leads to little updating of the principal's belief about their honesty. This introduces a tendency to prefer poor agents as they are easier to monitor. More generally, we describe the basic problem of choosing agents and monitoring consumption with the aim of reducing corruption, and discuss features o...

Published: RafaelDi Tella & Federico Weinschelbaum, 2008. "Choosing agents and monitoring consumption: a note on wealth as a corruption-controlling device," Economic Journal, Royal Economic Society, vol. 118(532), pages 1552-1571, October. citation courtesy of

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers onlyInformation about this author at RePEc

 
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