TY  - JOUR
AU  - Fan,C. Simon
AU  - Lin,Chen
AU  - Treisman,Daniel
TI  - Embezzlement Versus Bribery
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 16542
PY  - 2010
Y2  - November 2010
UR  - http://www.nber.org/papers/w16542
L1  - http://www.nber.org/papers/w16542.pdf
N1  - Author contact info:
C. Simon. Fan
Department of Economics
Lingnan University
Hong Kong, China
E-Mail: fansimon@ln.edu.hk

Chen Lin
Department of Finance,
Chinese University of Hong Kong,
Shatin, N.T., Hong Kong
E-Mail: chenlin@baf.msmail.cuhk.edu.hk

Daniel Treisman
Department of Political Science
UCLA
4289 Bunche Hall
Los Angeles, CA 90095-1472
Tel: 310/794-5875
Fax: 310/825-0778
E-Mail: treisman@polisci.ucla.edu
AB  - 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 bribery. We analyze the tradeoff for governments in deciding how strictly to monitor and punish these two kinds of bureaucratic misbehavior. When bribery is more costly to economic development, governments may tolerate some embezzlement in order to reduce the extent of bribery—even though embezzlement is generally easier to detect. Embezzlement serves as a parallel to the “efficiency wage.” This logic appears to hold in China, where misappropriation of public funds by officials appears to be ubiquitous.
ER  -