Can corruption foster regulatory compliance?

The legal and economic literatures overwhelmingly support the notion that regulatory compliance is always less in the presence of corruption. This paper departs from those literatures and shows that, whenever public officials are paid fixed wages, an increase in corruption may actually foster compliance. The conditions that make this possible are laid down in a theoretical model. Empirical evidence that corroborates the theoretical findings is provided using firm-level data for 26 transition economies.