Abstract

Most of the studies on Public Sector's corruption focused on the micro economic aspects of the criminal behavior and only limited research has conducted on the macro level in general and market equilibrium in particular. In an attempt to better understand the phenomenon of corruption this paper uniquely analyzes corruption in view of the 'network economy' theory and suggests a theoretical framework for understanding corruption equilibrium. I claim that corruption reaches equilibrium under two extremes which make it difficult for countries to move from one to the other. Unfortunately, it is thus almost impossible for a country to make a significant transition on its own and the chances of gradual reforms are generally not very good.

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