What is the Contribution of the Theory of Redistribution Systems to the Theory of Corruption?

Abstract

Abstract Scholars making economic policy recommendations to resolve corruption problem use several approaches, the most dominant of which are the principal-agent and rent-seeking theories. In this paper, we argue that the principal-agent theory has problems to account for the environment in which the agents offering and accepting corruption operate, and explain the importance of agents for survival of their environment. The rent-seeking theory, on the other hand, finds it difficult to establish socially effective legislation and ways to determine the barriers to entry that motivate agents to behave corruptly. Both problems, however, are vital for solving the problem of corruption. Lacking the knowledge of the agent’s environment (system) and their significance for survival of the system, the theory cannot define incentives that would discourage the agent from acting in a corrupted way. If the rent-seeking theory does not determine the barriers to entry that motivate agents to behave corruptly, it cannot determine the proper legislation that would deter corrupt behaviour and lead to economic development. For these reasons we investigate if both problems can be explained and solved within the alternative theory of redistribution systems and its part - the theory of parallel redistribution games.