Parochial corruption

Enforcement problems are frequently acute in illegal transactions such as bribery. However, if a government official and a member of the public share informal social or economic ties, this may enable them to enforce bribe transactions by “linking the games”. As a result, officials’ incentives to engage in corruption may be affected by the social structure of the society in which they are embedded. We show that governments wishing to deter parochial corruption will usually prefer to punish only the official receiving the bribe, not the bribe-payer.