then $5,000). They will be willing to pay at most $5,000 to the law enforcers to drop the evidence. If this is the case the enforcer is actually ending up with the same loss of money. In addition if the enforcers expect the bribe and know they will not be persecuted if caught they are likely to work for a salary $ 5,000 less than the salary they receive if they cannot take the bribe. Thus this paper shows us how monetizing punishment is actually more effective than jail term. However the effectiveness reduces if due to competition between bribe takers the offenders can get away with less than what they would have to pay if they faced a fair travel.
In order to reduce malfeasance the authors suggest paying the enforcers more than what they would receive elsewhere so that being detected will mean losing the stream of earnings from the job and the pension. In addition, according to this paper the enforcement personnel should be paid according to the violators they can apprehend.
Mauro and Driscoll (1997) cites the following as the causes of corruption:
1) Trade restrictions: such as import quotas make the limited number of import licenses very valuable leading to an opportunity for the government agents to take bribes in exchange for issue of the said license. In addition tariffs to protect local industries might give the local owners an incentive to bribe politicians to make sure this system stays in palce.
2) Subsidies: Another cause is poorly targeted subsidies which give industries the incentive to appropriate them by bribing key government agents.
3) Price Controls: where prices are lowered below their market levels which creates incentives for certain groups to try to bribe government officials to get the goods at the lower price
4) Low salary of public officials
5) Foreign exchange rationing and controls: if a country has three exchange rates; one for tourist; one for importers and other for exporters. Then there will always be incentive for the groups to take advantage of the most favorable exchange rate. In addition if there is foreign currency rationing due to its scarcity officials may accept bribes to divert this scarce resource to those less deserving away from those who deserve it more.
6) Natural resource endowments: These resources sell at a much higher price than the cost of extraction and are subject to stringent government regulations. Under this circumstance there will always remain the incentive to pay government officials for a more lax enforcement of the regulations.
7) Sociological factors: a country where family ties are strong; the officials may be more inclined or likely to grant their relatives undue favors than in an individualistic society.
The paper notes the following consequences of corruption:
1) Retardation of growth and investment
2) Misallocation of talent as talented officials engage in rent seeking instead of productive work
3) Lack of effectiveness from aid flows
4) Loss of tax revenue