This paper provides a simple model of corruption dynamics with the ratchet effect. As in Shleifer and Vishny (1993), we consider the sale of government property (entry permit) by government officials as the prototype of corruption activities. In a dynamic version of the Shleifer-Vishny model,...

This paper provides a simple model of repeated extortion. In particular, we ask whether corrupt government officials' ex post opportunism to demand more once entrepreneurs have made sunk investments entails further distortion in resource allocations. We show that the inability of government...