Abstract
Most of the studies on Public Sector's corruption focused on the micro economic aspects of the criminal behavior and only limited research has conducted on the macro level in general and market equilibrium in particular. In an attempt to better understand the phenomenon of corruption this paper uniquely analyzes corruption in view of the 'network economy' theory and suggests a theoretical framework for understanding corruption equilibrium. I claim that corruption reaches equilibrium under two extremes which make it difficult for countries to move from one to the other. Unfortunately, it is thus almost impossible for a country to make a significant transition on its own and the chances of gradual reforms are generally not very good.
Highlights
A well-known story describing public sector's corruption and its effect on society is attributed to Tiberius Caesar, as documented by Cornelius Tacitus, the senator and famous historian of the Roman Empire, in his great work The Annals
Most of the studies on Public Sector's corruption focused on the micro economic aspects of the criminal behavior and only limited research has conducted on the macro level in general and market equilibrium in particular
In an attempt to better understand the phenomenon of corruption this paper uniquely analyzes corruption in view of the 'network economy' theory and suggests a theoretical framework for understanding corruption equilibrium
Summary
A well-known story describing public sector's corruption and its effect on society is attributed to Tiberius Caesar, as documented by Cornelius Tacitus, the senator and famous historian of the Roman Empire, in his great work The Annals. The reason behind the Senate decision was the inconvenient situation the family faced: due to personal business losses, the family risked forfeiting its seat in the Senate in the nearest census Because of these losses, the family would not reach the minimum equity threshold necessary to hold a Senate seat without a grant. Only in the late 1960s did economists begin to study this issue (see Becker, 1968; Stigler, 1970; and Ehrlich, 1973) These and other researchers demonstrated that economic theory can provide important insights into criminal behavior and can contribute to the theoretical analysis of its impact on the economy and on society as a whole. In an attempt to better understand the phenomenon of corruption this paper uniquely analyzes corruption in view of the 'network economy' theory and suggests a theoretical framework for understanding corruption equilibrium
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