Bureaucratic Competition and Corruption: Theory and Experimental Evidence

We develop a tournament-style promotion-contest model in which local officials choose two forms of corruption: (i) rent-seeking graft, which depresses economic performance, and (ii) office-buying bribery, which increases promotion prospects through personal ties. The model predicts that stronger competition increases bribery but reduces graft.

Placing greater weight on GDP performance discourages graft and can shift incentives toward bribery. In a baseline specification with a reduced-form corruption-budget constraint, sufficiently strong GDP accountability drives graft to zero and, by eliminating the resources that finance office-buying, also eliminates bribery. We test these predictions in a laboratory experiment with four treatments that vary competition intensity and the weight on GDP.