Corruption and market reform

Market reforms in developing and transition economies have sometimes failed to deliver the desired welfare effects.Corruption may be an important reason for the inefficiency of market reforms, such as privatizationcampaigns. The present paper demonstrates howcorruption can affect the choice of buyer of a public asset. Our main result is that market reform in highly corruptsocieties is likely to result in less competition and lesseconomic efficiency than reform in less corrupt societies. We also demonstrate that the level of bribes in the sale ofpublic assets does not necessarily increase in thegovernment’s emphasis on bribes