Abstract
We study the efficiency of measures to fight bribery in a three-tier organization when corruption can propagate within the hierarchy and officials privately know their propensity for corruption. We show that if the organization relies on internal labor markets or superiors choose the effort exerted in monitoring, then increasing wages and stiffening supervi- sion may have perverse effects in the incentives of officials to act honestly, and therefore end up increasing the overall level of bribery.
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