Corruption and the Regulation of Innovation

Chiara, Alessandro De; Manna, Ester

doi:10.2139/ssrn.3482547

“…Likewise, De Chiara and Manna (2019) look at both forms of corruption in the context of the regulation of innovation, where the product of successful innovation needs to be authorized before its use. There are two types of regulation: strict and lenient authorization.…”

Section: A Review Of the Literaturementioning

confidence: 99%

Does it matter who extorts? Extortion by competent and incompetent enforcers*

Samuel

¹

,

Mishra

²

2021

Scottish J Political Eco

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Corruption can undermine law enforcement because it allows non-compliant agents to reduce their sanctions by paying a bribe (Becker, 1968;Becker & Stigler, 1974). The literature on corruption has identified two broad categories of bribes Burguet et al. (2018). The first type occurs when law-enforcement officers (henceforth, officers) accept a (smaller) bribe instead of sanctioning or fining those who are non-compliant. This form of bribery is collusive since both the officer and the non-complaint stand to gain by engaging in bribery. The second type of bribery, termed extortion, occurs when officers demand payments from compliant agents. Extortion, unlike bribery is non-collusive since the compliant do not gain by making this payment.

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“…Specifically, allowing collusion may prompt monitoring effort in Che (1995), whereas it can reduce the regulatory cost in our paper. However, Che (1995) considers a one-off interaction between the players and the revolving door is only one of the possible 1 Recent contributions to the design of regulation in the presence of corruption concerns include Drugov (2010), Hiriart et al (2010), Hiriart and Martimort (2012), Angelucci and Russo (2017), Ortner andChassang (2018), andManna (2019).…”

Section: Introductionmentioning

confidence: 99%

A dynamic theory of regulatory capture

Chiara

¹

,

Schwarz

²

2021

SSRN Journal

Self Cite

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Firms often try to influence individuals that, like regulators, are tasked with advising or deciding on behalf of a third party. In a dynamic regulatory setting, we show that a firm may prefer to capture regulators through the promise of a lucrative future job opportunity (i.e., the revolving-door channel) than through a hidden payment (i.e., a bribe). This is because the revolving door publicly signals the firm's eagerness and commitment to rewarding lenient regulators, which facilitates collusive equilibria. We find that opening the revolving door conditional on the regulator's report is usually more efficient than a blanket ban on post-agency employment and may increase social welfare. This insight extends to a variety of applications and can also be used to determine the optimal length of cooling-off periods.

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“…Specifically, allowing collusion may prompt monitoring effort in Che (1995), whereas it can reduce the regulatory cost in our paper. However, Che (1995) considers a one-off interaction between the players and the revolving door is only one of the possible 1 Recent contributions to the design of regulation in the presence of corruption concerns include Drugov (2010), Hiriart et al (2010), Hiriart and Martimort (2012), Angelucci and Russo (2017), Ortner andChassang (2018), andManna (2019).…”

Section: Introductionmentioning

confidence: 99%

A Dynamic Theory of Regulatory Capture

Chiara

¹

,

Schwarz

²

2021

SSRN Journal

Self Cite

1

0

View full text Add to dashboard Cite

Firms often try to influence individuals that, like regulators, are tasked with advising or deciding on behalf of a third party. In a dynamic regulatory setting, we show that a firm may prefer to capture regulators through the promise of a lucrative future job opportunity (i.e., the revolving-door channel) than through a hidden payment (i.e., a bribe). This is because the revolving door publicly signals the firm's eagerness and commitment to rewarding lenient regulators, which facilitates collusive equilibria. We find that opening the revolving door conditional on the regulator's report is usually more efficient than a blanket ban on post-agency employment and may increase social welfare. This insight extends to a variety of applications and can also be used to determine the optimal length of cooling-off periods.

show abstract

Corruption and the Regulation of Innovation

Cited by 3 publications

References 25 publications

Does it matter who extorts? Extortion by competent and incompetent enforcers*

Does it matter who extorts? Extortion by competent and incompetent enforcers*

A dynamic theory of regulatory capture

A Dynamic Theory of Regulatory Capture

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