Kleptocracy and corruption

In this paper, we develop a model that analyzes the competition and strategic interactions between a kleptocratic ruler and his officials in rent seeking. The ruler implements anti-corruption measures, which include wage incentives and monitoring, to discourage his opportunistic officials from seeking bribes to obtain more rent for himself. We show that the ruler pays an efficiency wage to his officials to eliminate corruption if and only if monitoring is relatively effective. We also demonstrate that, in a proprietary state, the ruler always sets an inefficiently high tax rate in order to discourage the officials from demanding bribes.