We thank Christopher Bliss, Ernesto Dal Bo, Robert MacCulloch and participants at several seminars, in particular the Gorman Workshop at Oxford, the LACEA meetings in Buenos Aires and the APET meetings in Marseilles, for helpful discussions and suggestions. An earlier version of this article was circulated under the title ‘To Catch a Thief: Wealth as a Corruption Controlling Device’.
Choosing Agents and Monitoring Consumption: A note on Wealth as a Corruption-Controlling Device*
Version of Record online: 20 SEP 2008
© The Author(s). Journal compilation © Royal Economic Society 2008
The Economic Journal
Volume 118, Issue 532, pages 1552–1571, October 2008
How to Cite
Tella, R. D. and Weinschelbaum, F. (2008), Choosing Agents and Monitoring Consumption: A note on Wealth as a Corruption-Controlling Device. The Economic Journal, 118: 1552–1571. doi: 10.1111/j.1468-0297.2008.02180.x
- Issue online: 20 SEP 2008
- Version of Record online: 20 SEP 2008
- Submitted: 24 June 2005 Accepted: 29 June 2007
There are a large number of cases where corruption has been discovered when investigating levels of consumption that appear to be hard to justify. The informativeness of an agent's level of consumption depends on his legal income and initial level of wealth, as conspicuous consumption by wealthy agents leads to little updating of the principal's belief about their honesty. This introduces a tendency to prefer poor agents as they are easier to monitor. More generally, we describe the basic problem of choosing agents and monitoring consumption with the aim of reducing corruption, and discuss features of the practical applications.