The basic framework

A. Introduction

Theoretical work on corruption has so far been grounded in the political–economic environment of Western capitalist societies (e.g., Becker and Stigler, 1974, and Rose-Ackerman, 1978) or underdeveloped countries (e.g., Johnson, 1975; Krueger, 1974; and Scott, 1972). Papers discussing corruption in the Soviet Union and Eastern Europe are mainly descriptive and lack both a well-developed theoretical structure and a comparison with Western experience (see Grossman, 1977; Katsenelinboigen, 1978; Kramer, 1977; and Simis, 1979). This chapter attempts to organize the material available on corruption in Soviet-type economies and to develop theoretical principles capable of explaining the behavior of corrupt agents in these systems.

We first identify a few of the most salient characteristics of Soviet-type economies. This exercise permits usto isolate corrupt incentives that may lead people to break the law or to violate the rules laid down by their organizational superiors. We speculate on the efficiency of corrupt transactions and consider how modifications in the rules might deter such behavior. The evidence we supply is anecdotal and is used merely to illustrate our points. The comparisons we make with corruption in market-oriented economies are meant only to set in relief the particular modes of behavior we think are more likely to be encountered in centrally administered Soviet-type economies.

In our stylized Soviet-type economy the bulk of economic activity is carried on by individuals, called agents, organized in a complete hierarchy (CH).