Corruption in dictatorships

In this paper, we consider a simple model capable of explaining why some dictatorships choose to extract rents via seemingly inefficient institutions. In particular, this paper focuses on institutions associated with high levels of corruption and examines the conditions under which such institutions could serve the interests of a dictatorship. Developing such a model requires that we pose alternative institutions that dictators can choose to extract rents. Using this framework, this paper builds a model providing a theoretical basis for some stylized facts about the observed crosscountry variation in corruption levels. Specifically, the model motivates a rationale for the finding that higher levels of corruption are observed in countries characterized as having more heterogeneous populations, longer expected dictator tenure, and more severe punishment norms. The model is then estimated using international country level data.