Corruption Leading To Poorly Maintained Equipment and Infrastructure

Abstract

This paper presents a simple model which explores the idea that corruption can result in inefficiently low levels of expenditure on maintaining infrastructure and equipment. In this model an official bargains with the supplier of a fleet of motor vehicles as to the size of the bribe (or kickback) that the supplier pays. The bribe is in return for the official using public funds to purchase the vehicles at an over inflated price. When the cost for the official of being caught is very low, the amount the official spends on vehicle maintenance is close to the non-corrupt level. When the cost of getting caught increases (for a given corrupt mark-up of the vehicle price) the level of expenditure on maintenance falls as the official mitigates the cost of being caught. If the cost of being caught is sufficiently high, the official will choose not to act corruptly.