Political Regime and Corruption Control: Information Quality and an Optimal Mechanism

Different political regimes have principals that possess different in- formation regarding agents' behavior. This paper studies how this difference affects the comparative efficiency of corruption control between a democratic regime and an authoritarian regime. We ob- serve that such comparative efficiency depends heavily on the anti- corruption mechanism specified. We find that a yardstick mech- anism is an optimal mechanism, and establish that, under such a mechanism, comparative efficiency depends on the quality, not only the quantity, of information. Furthermore, we make clear that high-quality information is that which captures the pattern of variation in the agents' hidden information. This study also sheds light on the nature of the costliness of corruption by arguing that the variability in hidden information across corrupt agents is an essential reason for the inefficiency caused by corrupt behavior.