Corruption and market reform

Market reforms in developing and transition economies have sometimes\nfailed to deliver the desired welfare effects. Corruption may be\nan important reason for the inefficiency of market reforms, such as\nprivatization campaigns. The present paper demonstrates how corruption\ncan affect the choice of buyer of a public asset. Our main\nresult is that market reform in highly corrupt societies is likely to result\nin less competition and less economic efficiency than reform in less\ncorrupt societies. We also demonstrate that the level of bribes in the\nsale of public assets does not necessarily increase in the government’s emphasis on bribes.