corruption and government size a disaggregated analysis using annual state level data over 1983 1987 this paper examines the effect of government size on corruption by public officials by including both demand and supply side incentives for engaging in corrupt practices our objectives are twofold first we assess the relationship between the incidence of corruption and overall measures of the size of the federal government and the state local sector in each state second we explore what kinds of government activities are more likely to be successful in deterring abuse of public office our results are generally supportive of becker s crime and punishment model regarding the primary focus of the paper our results show that government size in particular spending by state governments does indeed have a strong positive influence on corruption

are corruption and taxation really harmful to growth firm level evidence exploiting a unique data set containing information about the estimated bribe payments of ugandan firms the authors study the relationship between bribe payments taxes and firm growth in uganda for the period 1995 97 using industry location averages to circumvent the potential problem of endogeneity and to deal with issues of measurement error they find that both the rate of taxation and the rate of bribery are negatively correlated with firm growth for the full data set a one percentage point increase in the bribery rate is associated with three percentage point reduction in firm growth an effect about three times that of taxation moreover after excluding outliers the authors find that bribery has a much greater negative impact on growth and taxation a considerably smaller one this provides some validation of firm level theories of corruption which posit that corruption retards development even more than taxation does

corruption manufacturing plant growth and the asian paradox indonesian evidence summary using panel data from the indonesian manufacturing industry during the suharto era 1975 95 we assess the impact of plant level corruption on output and productivity growth in support of the grease the wheels hypothesis and the view of an asian paradox we find that corruption measured as bribes and indirect tax payments has a positive and statistically significant effect on individual plant growth this effect persists over the entire period which suggests improvements in the efficacy of the bribe system and a strengthening of the long term contract between firms and the government

corruption and firm behavior evidence from african ports this paper investigates how corruption affects firm behavior using an original and unusually rich dataset on bribe payments at ports matched to firm level data we observe how firms adapt to different types of corruption by adjusting their transport strategies our results suggest that firms respond to the price effects of corruption organizing production in a way that increases or decreases demand for the public service

endogenous quality differentiation in congested markets firms selling a product with congestion externalities to a heterogeneous population of customers have an incentive to offer differentiated levels of quality in a price competitive market differentiation arises endogenously through the prices chosen by firms in equilibrium firms offer a range of prices which induce an efficiency improving range of quality levels and allow customers to self select their preferred price quality combinations additional results suggest that with many firms in the market the choice of prices dominates the choice of service capacities in determining congestion levels copyright 1991 by blackwell publishing ltd

the comparative politics of corruption accounting for the east asian paradox in empirical studies of corruption growth and investment abstract numerous empirical studies demonstrate that corruption reduces investment and or slows growth but how robust are these relationships this question is answered by conducting a series of crosscountry regression tests using four different corruption datasets we find that corruption slows growth and or reduces investment in most developing countries particularly small developing countries but increases growth in the large east asian newly industrializing economies the latter finding provides solid empirical support to a country case literature that explains the east asian paradox the combination of high corruption and high growth in terms of stable and mutually beneficial exchanges of government promotional privileges for bribes and kickbacks

an equilibrium queuing model of bribery it is sometimes argued that bribery is inefficient because bureaucrats may cause delays for attracting more bribes this hypothesis is examined in the context of a queue where customers having different values of time are ranked by their bribe payments to the queue s server the nash equilibrium strategies of the customers are derived it is shown that the server is unlikely to slow down the allocation process when bribery is allowed the model does not have stringent informational requirements and the equilibrium outcome minimizes the average value of time costs of the queue it also suggests a useful auctioning procedure

bureaucracy intermediaries corruption and red tape abstract intermediaries that assist individuals and firms with the government bureaucracy are common in developing countries although such bureaucracy intermediaries are anecdotally linked with corruption and welfare losses few formal analyses exist we introduce a model in which a government license can benefit individuals we study the net license gain when individuals get the license through the regular licensing procedure through bribing or through intermediaries for a given procedure individuals using intermediaries are better off than if intermediaries and corruption had not existed then we study the incentives of corrupt bureaucrats to create red tape bureaucrats implement more red tape and individuals are unambiguously worse off in a setting with intermediaries than with direct corruption only intermediaries can thus improve access to the bureaucracy but also strengthen the incentives to create red tape a potential explanation why licensing procedures tend to be long in developing countries

corruption is bad for growth even in the united states we estimate the impact of corruption on growth of output per worker in u s states we improve on existing studies of the cost of corruption by using a better specified empirical model focusing on a study population that is less likely to be affected by parameter heterogeneity and controlling for endogeneity using political variables to instrument for corruption we find that corruption plays a significant and causal role in lowering growth and investment across the states

is corruption grease grit or a gamble corruption increases variance of productivity across countries the effect of corruption on economic growth has attracted interest in empirical development economics the conventional view of corruption as impediment for growth has been challenged by the grease on the wheels hypothesis we take a new perspective on the issue and suggest corruption as macro risk referred to as a gamble hypothesis using cross country data and two alternative indicators of corruption we find corruption to be a significant driver of heteroscedasticity in total productivity this supports the new gamble hypothesis we also note some misleading interpretations in the previously published frontier applications to avoid these shortcomings we apply a flexible semi nonparametric estimator

corporate tax effects on the quality and quantity of fdi this paper measures the relative importance of quality and quantity effects of corporate taxation on foreign direct investment quantity is affected if corporate taxes reduce the equilibrium stock of foreign capital in a given country quality effects arise if taxes decrease the extent to which investment contributes to the corporate tax base and the capital intensity of production depending on the sign of the quality effects the detrimental welfare effects of corporate taxation are either mitigated or aggravated we derive a number of hypotheses how corporate tax changes may affect the quality of investment our hypotheses are then tested using data from a large sample of european multinationals with regard to corporate tax effects on the corporate tax base we find that quality effects account for up to fourty per cent of the total effect with regard to corporate tax effects on labour income our results suggest that quality effects mitigate the negative quantity effect by nearly sixty percent as corporate taxes strongly increase the labor intensity of production an important implication is that governments should not exclusively care about the size of inbound fdi flows but also about their specific characteristics i e their quality

is growth corrupted or bureaucratic panel evidence from the enlarged eu abstractthis article aims at analysing the issue of conditional convergence in the new enlarged european union eu over the period 1995 2012 by means of panel data techniques we examined the issue of conditional convergence in the enlarged eu giving particular attention to the effects of corruption and bureaucracy on growth controlling for a widely used set of explanatory variables such as investment domestic and foreign human capital formation inflation general government final consumption and trade openness furthermore we examine if growth responds differently to corruption and bureaucracy in the new eu members by means of two group specific interaction variables to capture possible different responses to corruption and bureaucracy the analysis reveals evidence of conditional convergence in the enlarged eu with investment share foreign direct investment human capital and country openness appearing as robust growth drivers in contrast inflation and government consumption rather hamper gro

the incidence and persistence of corruption in economic development abstract economic development and bureaucratic corruption are determined jointly in a dynamic general equilibrium model of growth bribery and tax evasion corruption arises from the incentives of public and private agents to conspire in the concealment of information from the government these incentives depend on aggregate economic activity which in turn depends on the incidence of corruption the model produces multiple development regimes transition between which may or may not occur in accordance with recent empirical evidence the relationship between corruption and development is predicted to be negative

open for innovation or bribery to secure bank finance in an emerging economy a model and some evidence abstract in an emerging economy like china characterized by scarce financial resources excessive red tape and rampant corruption firms are advised to bribe bank officials to grease the wheels of bank lending in order to secure the fund they need for innovation business venturing and growth drawing on the literature on corruption and open innovation we develop a model to illustrate that bribery fails to ease bank lending when red tape is endogenous whereas openness for innovation smooths bank lending no matter whether red tape is exogenous or endogenous openness for innovation is more effective than bribery in helping a firm reduce red tape to secure bank finance based on a dataset of chinese firms provided by the world bank our findings strongly support the argument we find that openness for innovation has a positive relationship with both the access to bank finance and the size of bank finance whereas bribery is related to neither supplementary tests further suggest that the positive relationship is mainly driven by private firms and manufacturing firms our findings help firms make decisions to select an effective and yet socially responsible approach to securing bank finance

extractive bribe and default in subsidized credit programs abstract we present a dynamic model of subsidized credit provision to examine how asymmetric information exacerbates inefficiency caused by corruption if a borrower and a corrupt official interact with symmetric information credit terms can be so designed that corruption will affect only the borrower s profit but not repayment with private information on the borrower s productivity this result changes because of dynamic information rents the official may induce one type of the borrower to default the government can improve the repayment rate but will have to under provide credit in contrast some allowance of default permits a greater supply of credit

priority auctions and queue disciplines that depend on processing time we analyze the allocation of priority in queues via simple bidding mechanisms in our model the stochastically arriving customers are privately informed about their own processing time they make bids upon arrival at a queue whose length is unobservable we consider two bidding schemes that differ in the definition of bids these may reflect either total payments or payments per unit of time and in the timing of payments before or after service in both schemes a customer obtains priority over all customers waiting in the queue or arriving while he is waiting who make lower bids our main results show how the convexity concavity of the function expressing the costs of delay determines the queue discipline i e shortest processing time first spt longest processing time first lpt arising in a bidding equilibrium

waiting line auctions if prizes are to be awarded simultaneously at a specified time on a first come first served basis then individuals who queue for them will choose different waiting times through their arrivals at the queue this choice of arrival time at a queue is similar to the choice of a sealed tender in an auction an equilibrium for this waiting line auction is obtained here using methods for analyzing sealed tender auctions when individuals are risk neutral it is shown that several alternative waiting line allocation procedures result in the same transactions cost associated with waiting in line

technical efficiency and economies of scale in state owned enterprises the hellenic telecommunications organisation abstract in this paper we propose methodologies for assessing the relative efficiency of state owned enterprises that operate under monopolistic conditions irrespective of the ownership structure private or public monopolistic operation is often given unclear conflicting operating objectives by their principals or regulators and thus efficiency should be assessed using alternative objectives such as cost production and revenue on the methodological side the paper employs parametric functional forms using ordinary least squares and goal programming methods of estimation a secondary estimation stage was also pursued with the input output variables of the models being corrected for technical inefficiency the methodology was applied to examine the technical efficiency and economies of scale of the hellenic telecommunications organisation over the period 1971 1993

an efficiency and welfare classification of rationing by waiting in the presence of bribery abstract governments often allocate commodities at low prices and on a first come first served basis rationing by waiting while bureaucrats who distribute the commodities usually take bribes a model is developed to classify the efficiency implications of bribery and socially optimal pricing schemes in rationing by waiting if the rationed good and individual income spent on other goods other income are complements then bribery may enhance allocative efficiency and a dual pricing scheme can augment social welfare however if the rationed commodity and other income are substitutes then bribery may not improve allocative efficiency and distributing the rationed commodity free is socially optimal

on the economic incentives for taking bribes this paper presents an empirical analysis of the factors affecting bribe taking by public officials factors influencing the acceptance of bribes include the probability of being convicted severity of punishment government salary relative to private sector income the demonstration effect and the unemployment rate our results indicate that higher probability of being convicted discourages the acceptance of bribes as does more severe punishment low relative earnings high unemployment and the demonstration effect of aggregate advertising all lead to increased bribe taking

is corruption an efficient grease this paper tests whether corruption may be an efficient grease in the wheels of an otherwise deficient institutional framework it analyzes the interaction between aggregate efficiency corruption and other dimensions of governance for a panel of 69 countries both developed and developing using two measures of corruption and two other aspects of governance we observe that corruption is less detrimental to efficiency in countries where institutions are less effective it may even be positively associated with efficiency in countries where institutions are extremely ineffective we thus find evidence for the grease the wheels hypothesis in its weak and strong forms

environmental performance corruption and economic growth global evidence using a new data set abstractthis study investigates the relationship between environmental performance corruption and economic growth using panel data of 87 countries covering the period from 2002 to 2012 the environmental performance index is used for the first time to evaluate the environmental quality on economic growth by employing both static and dynamic panel models we find that environmental performance is positively related to economic growth and is more significant in non organization for economic cooperation development oecd countries moreover when corruption is incorporated the empirical estimation results indicate that although lower corruption helps economic growth in non oecd countries the negative coefficients of the three interactive terms show that the positive effect of environment performance on economic growth will drop while greater environmental performance combined with natural resource abundance inevitably leads to inefficient bureaucracies and hence disadvantageous economic growth as

obtaining a driver s license in india an experimental approach to studying corruption we conduct two experiments to understand the process of obtaining a driver s license in india in the first experiment we randomly assign license candidates to one of three groups bonus offered a financial reward if they could obtain their license fast lesson offered free driving lessons upfront and control the control group alone illustrates bureaucratic failures 71 of the license getters in that group avoided the mandated driving test and 62 failed a surprise driving test the system responds to private needs there are more license getters in the bonus group but at a social cost there are more license getters who cannot drive in the bonus group the system however also appears to respond to social considerations as there are more license getters in the lesson group large extra legal payments are made by license getters those in the control group pay 2 5 times the official fee more of these extra legal payments take place in the bonus group surprisingly these extra legal payments are not direct bribes to bureaucrats but instead payments to agents in the second experiment we perform an audit study to better understand the role of agents the audit shows that agents can provide licenses to individuals even if they cannot drive but the audit also shows that agents cannot as easily circumvent all other rules we argue that our findings are most consistent with agents being the channel for corruption in this system we also report some suggestive evidence that bureaucrats create red tape possibly to induce more license candidates to use agents

does corruption boost or harm firms performance in developing and emerging economies a firm level study in the last decade a growing number of studies have addressed the ongoing debate about whether corruption sands or greases the wheels of business at the firm level this study revisits this debate and proposes a comprehensive theoretical framework to test whether corruption harms or boosts firm performance as well as the extent to which this relationship is mediated by the countries institutional settings the size and strategic behaviour of the firms and market competition based on a sample of 21 250 firms located in 117 emerging and developing countries and resorting to instrumental variable iv estimations three main results were found a regardless of the proxy used for corruption and firm performance the former clearly harms the latter b corruption greases the wheels of business for african firms but it sands the wheels for firms in latin america the caribbean eastern europe central asia and southern asia and c the negative impact of corruption on performance is mitigated for larger and exporting firms

corruption and development a review of issues in this paper we start with a discussion of some of the different denotations of the problem of corruption we then consider the ways in which the damaging consequences of corruption operate in a developing economy while not ignoring its possible redeeming features in some cases we pursue the question of why corruption is perceptibly so different in different societies and also persistent finally we examine the feasible policy issues that arise in this context

state governance evolution in resource rich transition economies an application to russia and kazakhstan following a decade of transition in the former soviet union fsu governance of the oil and gas sectors has evolved to economic nationalism in the newly independent states this has manifested itself through greater direct state ownership or participation in oil and gas production at the expense of both domestic in the case of russia and international oil companies as well as legislative developments that increase the flow of oil and gas value to the state here we analyse some of the dynamics giving rise to economic nationalism within a model of a state capacity and the ability to implement policy and extract value our analysis is based on the institutional and economic functioning of the oil and gas sector we analyse a vector of institutions and examine production sharing agreements and national oil companies

on controlling crime with corrupt officials abstract this paper attempts to synthesize the recently developed strategic approach towards modeling corruption and the classical views the following propositions are sought to be proved a if reward schemes are introduced the classical and the strategic approaches yield similar results so far as controlling crime is concerned b with probability of detection being dependent on the effort of a corrupt official crime cannot be controlled and c in the context of an infinitely repeated game of crime the corrupt law enforcing agent might choose less bribes and lower effort level than the myopic optimal and hence would strategically pamper crime

corruption as a gamble abstract in the following model of corruption a simple game is set up whose players are a government official granting a permit conditional on a test and a candidate requesting the permit the game is solved under different assumptions as to the information sets of the players perfect information asymmetric information and imperfect information on both sides in the latter case after characterizing the solution and presenting some important comparative statics results the paper moves on to show the emergence of multiple equilibria in corruption illustrating the interaction of corruption at different hierarchical levels of an administration

clientelism corruption and the allocation of resources corruption has been shown to have more serious effects upon allocation than simply drawing resources into rent seeking activities if politicians anticipate gains from corruption in the policy making process sub optimal policies will be the result typical examples include excessive nationalization of industry excessive regulation of the private sector through practices such as licensing and quotas with a view to extract the rent created by these measures in addition further misallocation will result at the execution state it has been shown that the revisionists were wrong in assuming that licenses and contracts will be allocated to the most efficient producers that rent will be eliminated in government employment and that corruption increases the efficiency of the bureaucracy moreover differential access to government services leads to additional allocative losses

incentive compatible pricing for a service facility with joint production and congestion externalities this paper considers the pricing problem of a service facility when services are jointly produced by the customers and the facility building on the work of mendelson 1985 we model the facility as a gi gi 1 queue with customer chosen service rates and linear delay costs we show that the service rates chosen by the customers based on their self interest are always suboptimal for the facility due to congestion externalities we derive optimal incentive compatible pricing schemes that can achieve optimal arrival rates and induce customers to choose optimal service rates for the case of systemwide net value maximization we show that the optimal incentive compatible pricing scheme consists of a variable fee that is proportional to the actual service time and a fixed rebate that is equal to a customer1s expected delay cost in the queue for the case of profit maximization of the facility we show that the optimal pricing scheme again consists of a fixed fee and a variable fee one insight from our analysis is that it may be appropriate for a service facility to reimburse each customer for his actual delay cost in the queue

how does corruption affect public debt an empirical analysis summary this paper investigates the relationship between corruption the shadow economy and public debt it additionally examines whether the shadow economy increases the adverse effects of corruption on public debt the model is empirically tested for 126 countries over 1996 2012 using ordinary least squares ols fixed effects system generalized method of moments gmm and instrumental variable estimation and two measures of corruption the transparency international corruption perceptions index and the kaufmann et al corruption index results confirm that increased corruption and a larger shadow economy lead to an increase in public debt results additionally indicate that the shadow economy magnifies the effect of corruption on public debt suggesting that they act as complements results also suggest that a larger shadow economy reduces tax revenues and thus increases public debt similarly higher government expenditure enhances the effects of corruption on government debt hence reducing corruption should be a primary policy goal of governments given the complementarity detected between corruption and the shadow economy reducing corruption would also lead to a fall in the size of the shadow economy and public debt reducing corruption will also minimize the adverse effects of corruption on government debt through government expenditure

a dynamic model of corruption deterrence abstract this paper presents a model of corruption deterrence with a simple overlapping generations structure built into it a crucial assumption is that when corruption becomes more prevalent in the economy it is harder to audit a corrupt official effectively it is shown that this assumption may give rise to several stationary equilibrium levels of corruption this possibility has been exploited to explain why sometimes a government may temporarily resort to an extremely severe deterrence policy and why the same deterrence scheme may imply quite different levels of corruption a case study is provided to give empirical support to the model

distribution and development in a model of misgovernance abstract this paper presents an analysis of bureaucratic corruption income inequality and economic development the analysis is based on a dynamic general equilibrium model in which bureaucrats are appointed by the government to implement a redistributive programme of taxes and subsidies designed to benefit the poor corruption is reflected in bribery and tax evasion as bureaucrats conspire with the rich in providing false information to the government in accordance with empirical evidence the model predicts a positive relationship between corruption and inequality and a negative relationship between corruption and development

the impact of corruption on consumer markets evidence from the allocation of second generation wireless spectrum in india abstracttheoretical predictions of the impact of corruption on economic efficiency are ambiguous with models allowing for positive negative or neutral effects while much evidence exists on levels of corruption less is available on its impact particularly its impacts on consumer markets this paper investigates empirically the effect of the corrupt sale of spectrum licenses to ineligible firms on the wireless telecommunications market in india i find that the corrupt allocation had at worst no impact on the number of subscribers prices usage revenues competition and measures of quality i argue that the market based transfer of licenses to competent firms other than the original awardees combined with fierce competition in the telecommunications sector may have mitigated potential deleterious impacts of corruption on consumers these results suggest that the original corrupt allocation did not matter which provides support for the coase theorem

corruption types of corruption and firm financial performance new evidence from a transitional economy using a nationwide survey of provincial institutional quality and a sample of private manufacturing small and medium scale enterprises the smes this paper contributes to the literature by considering for the first time the effects of corruption on the financial performance of vietnamese private smes interestingly contrary to previous findings we find that corruption when measured by a dummy variable does not affect firms financial performance after controlling for heterogeneity simultaneity and dynamic endogeneity however the intensity of bribery and the majority of the forms of corruption were found to have negative impacts on firms financial performance hence a typical approach using only a dummy variable for bribery might not adequately evaluate the impact of bribe intensity or even ignores the negative impacts of some types of bribes on firms financial performance the findings suggest that anti corruption measures are vital for the development of the vietnamese private smes

does corruption attenuate the effect of red tape on exports i use firm level data to examine whether corruption attenuates the adverse effects of red tape on exports i find that conditional on there being customs related red tape a firm is better off if it can use bribes to lower the delay that it faces however i also find that corruption has a negative overall effect on a firm s decision to export that is corruption prevents some firms from entering the export market these results suggest that to gauge the overall effect of corruption we must compare its red tape attenuating effect with its adverse effect on a firm s decision to export jel f10 f14 k42

a model of bureaucracy and corruption we analyze bureaucracy and corruption in a market with decentralized exchange and lemons exchange is modeled as a sequence of bilateral random matches agents have private information about the quality of goods they produce and can supplement trade with socially inefficient bribes bureaucracy is modeled as a group of agents who enjoy centralized production and consumption transaction patterns between the bureaucracy and the private sector are fully endogenous centralized production and consumption in the bureaucracy give rise to low power incentives for the individual bureaucrats as a result private agents might bribe bureaucrats whereas they do not bribe each other an equilibrium with corruption and an equilibrium without corruption can coexist we discuss some welfare implications of the model

are they efficient in the middle using propensity score estimation for modeling middlemen in indian corporate corruption corrupt regulatory environment encourages firms to deploy middlemen for speedy and assured acquisition of different services from regulatory agencies using a world bank dataset of 2210 indian manufacturing firms this article examines how firms with middlemen deal with corrupt governmental agencies for its operational efficiency our results demonstrate that deployment of middlemen by the firms is often accompanied by a substantial increase in operational delay relatively trigger more consumption of senior management s time on regulatory disentanglement enhance the likelihood tendency to pay bribe and likely to face more court cases as a means of restitution of legal rights as firm specific attributes may contaminate our preliminary results we utilized the propensity score framework to examine relationships among variables of interests our study contributes to the inconspicuous part of the corruption literature by attempting to present a comprehensive but indirect assessment of the functions of middlemen that predominantly remained unattended except some scattered descriptive case based anecdotal presentations

moonlighting public service and private practice we study job incentives in moonlighting when public service physicians may refer patients to their private practices some doctors in the public system are dedicated and behave sincerely but others the moonlighters are utility maximizers allowing moonlighting always enhances aggregate consumer welfare but equilibrium public care quality may increase or decrease if quality increases moonlighting improves each consumer s expected utility unregulated moonlighting may reduce consumer welfare as a result of adverse behavioral reactions such as moonlighters shirking more and dedicated doctors abandoning their sincere behavior price regulation in the private market limits such adverse behaviors in the public system and improves consumer welfare

fiscal policy in general equilibrium empirical estimates from an error correction model recent general equilibrium models of fiscal policy suggest that the government purchases multiplier can exceed unity and that the multiplier should be larger in the long run that in the short run these results follow from dynamic supply side interactions of labour and capital and are in sharp contrast to the implications of earlier equilibrium models a cointegrating regression and an error correction model are used to test these implications of the equilibrium model of fiscal policy empirically data for post war usa provide strong empirical support for the equilibrium model

sovereign credit spreads under good bad governance abstract this paper explores how sovereign credit spreads vary with the level of governance an analysis of 74 countries over the 2001 2016 period shows that sovereign credit default swap cds spreads decrease with government effectiveness particularly in countries exhibiting severe default risk high indebtedness and poor economic conditions we formulate a theoretical explanation for these findings using a structural model in which governments adjust default and debt policies based on their abilities to collect and use fiscal revenues the theory posits that more effective governments have less incentive to default and thus benefit from narrower credit spreads although they may choose higher indebtedness levels

how corruption influences foreign direct investment a panel data study abstract this article analyzes the sign and development of the effect of corruption on foreign direct investment fdi economic theory distinguishes grabbing hand corruption from helping hand corruption the former suggests a negative impact of corruption on fdi the latter one a positive effect empirically we apply a data set of 21 home and 59 developed and less developed host countries covering between 1983 and 1999 to investigate the corruption impact we employ a panel data model that particularly refers to the knowledge capital model of multinational activity we find a negative relationship between corruption and fdi this in turn suggests that the helping hand effects of corruption are outweighed by the grabbing hand effects further we observe that corruption is an important impediment of fdi in developed economies but not in less developed ones finally we demonstrate that the importance of corruption has decreased over the years

corruption governance investment and growth in emerging markets the article investigates the potential impact of corruption on economic growth by examining the effect that corruption may have on several significant determinants of economic growth namely investment in human private and public capital and on governance our theoretical approach allows for corruption to influence economic growth directly and indirectly through different investment and governance channels all previous empirical work on this issue has been based on national income and product accounts nipa data which do not normally break down gross domestic investment into its private and public sector and if they do they misclassify investment by public enterprises as private investment potentially biasing empirical findings in this article we use a data set from the international finance corporation that bypasses these problems we find that the impact of corruption on the level of public investment appears to be more ambiguous than it has been found in the previous literature we however

corruption and local democratization in indonesia the role of islamic parties indonesia has a tradition of corruption among local officials who harass and collect bribes from firms this paper examines whether corruption is affected by local democratization and by the party composition of local assemblies democratization occurred in 1999 and decentralization in 2001 we have firm level data for 2001 and 2004 the 2001 data benchmark corruption at the time of decentralization we find that corruption declines between 2001 and 2004 overall but much less so in districts with more secular party as opposed to islamic party representatives in district assemblies for a larger sample of districts correspondingly we find that corruption in 2004 is more in districts which voted more in favor of secular party representatives in the first elections in 1999 we argue that the effects seem to be causal over above any effects of changing religiosity and economic circumstances across districts

good and bad institutions is the debate over cross country firm level evidence from the textile industry using firm level data from nine developing countries we demonstrate that certain institutions like restrictive labour market regulations that are considered bad for economic growth might be beneficial for production efficiency whereas good business environment which is considered beneficial for economic growth might have an adverse impact on production efficiency we argue that our results suggest that there might be significant difference in the macro and micro impacts of institutional quality such that the classification of institutions into good and bad might be premature

deals and delays firm level evidence on corruption and policy implementation times whether demands for bribes for particular government services are associated with expedited or delayed policy implementation underlies debates around the role of corruption in private sector development the grease the wheels hypothesis which contends that bribes act as speed money implies three testable predictions first on average bribe requests should be negatively correlated with wait times second this relationship should vary across firms with those with the highest opportunity cost of waiting being more likely to pay and facing shorter delays third the role of grease should vary across countries with benefits larger where regulatory burdens are greatest the data are inconsistent with all three predictions according to the preferred specifications ceteris paribus firms confronted with demands for bribes take approximately 1 5 times longer to get a construction permit operating license or electrical connection than firms that did not have to pay bribes and respectively 1 2 and 1 4

bureaucratic corruption and endogenous economic growth there appears to be significant diversity in the incidence of bureaucratic corruption across countries at different stages of economic development and under different political and economic regimes little theoretical or empirical analysis has been offered however on the link between corruption government and growth the paper attempts to fill the void through equilibrium models of endogenous growth balanced growth is derived as a balancing act between accumulating human capital which engenders growth and accumulating political capital which mainly assures bureaucratic power the analysis focuses on the interplay between investment in these two types of capital and its implications for long term growth under alternative political regimes some propositions are tested and confirmed empirically

corruption and investment theory and evidence from china abstract we consider a principal agent model to examine the conditions under which corruption prompts investment we also investigate three policies that can be used to combat corruption strengthening monitoring increasing compensation and enhancing accountability our theory suggests that increasing monitoring intensity mitigates corruption at the cost of reduced investment the most cost effective policy to control corruption is to enhance accountability which reduces corruption without decreasing growth enhancing investment we test our theo retical predictions using chinese infrastructure investment and corruption data the data show that infrastructure investment is negatively correlated with anti corruption effort as predicted by the theoretical model