factors influencing the incidence of bribery payouts by firms a cross country analysis this article explores micro and macro level variables that influence the incidence of bribery payouts by firms a rich data set with information from 55 countries was utilized to achieve this objective results of logit regression models indicate that there are a number of micro and macro level factors that significantly affect the incidence of bribery payouts this suggests that it is not only the characteristics of a firm but also the environment of doing business that affect the firm s bribery decision the results of this study provides information that may help firms develop strategies to reduce corruption in their respective industries and thereby improve their image of corporate social responsibility the analysis also points to possible policy directions that governments could undertake in order to reduce the incidence of bribery in their country

bribes lobbying and development paign contributions or influence buying through other means as an activity that is aimed at changing existing rules or policies we view bribery in contrast as an attempt to bend or get around existing rules or policies the analysis contrasts these two means of influencing politics we use the labels lobbying and bribery for convenience and not because they are perfect defini tions for the two rent seeking activities we study in reality bribery and lobbying differ in several di mensions first lobbying is a legal and regulated activ ity in many countries whereas bribery is not second a change in the rules as a result of lobbying often af fects an entire industry whereas the return to bribery is more firm specific third a government that ponders a change in the rules might have quite different concerns than a bureaucrat considering a bribe our model cap tures all these differences possibly the most important difference however and the driving assumption in the model is that bending the rules is only temporary bu reaucrats can seldom commit to not asking for bribes in the future because corrupt deals are not enforceable in courts and because firms deal with different officials over time a legislative change on the other hand al ters the status quo and is therefore likely to last longer although policies and politicians also change over time our key assumption is that changing the rules is long lasting relative to bending them 2

the choice between market failures and corruption because government intervention transfers resources from one party to another it creates room for corruption as corruption often undermines the purpose of the intervention governments will try to prevent it they may create rents for bureaucrats induce a misallocation of resources and increase the size of the bureaucracy since preventing all corruption is excessively costly second best intervention may involve a certain fraction of bureaucrats accepting bribes when corruption is harder to prevent there may be both more bureaucrats and higher public sector wages also the optimal degree of government intervention may be nonmonotonic in the level of income

the rule of law and economic growth where are we summary it is widely assumed that the rule of law is essential for economic growth however the rule of law is clearly a multidimensional concept encompassing a variety of discrete components from security of person and property rights to checks on government and control of corruption we review the theory underlying these different causal mechanisms linking the rule of law to economic growth and provide an introduction to some outstanding measurement issues we find that the correlation among different components of the rule of law concept are not tight among developing countries and that some inferences about the effects of property rights protection may not be warranted

human capital inequality and economic growth some new evidence this paper provides new measures of human capital inequality for a broad panel of countries taking attainment levels from barro and lee 2001 we compute gini coefficients and the distribution of education by quintiles for 108 countries over five year intervals from 1960 to 2000 using this new cross country data on human capital inequality two main conclusions are obtained first most countries in the world have tended to reduce the inequality in human capital distribution second human capital inequality measures provide more robust results than income inequality measures in the estimation of standard growth and investment equations

is the efficiency wage efficient the social norm and organizational corruption the effectiveness of efficiency wage incentives is often jeopardized by perverse organizational corruption we model organizational corruption as a phenomenon of social interaction and relate the substantial psychological role characterizing the social norm to the corruption problem we find that if the status quo bribery rate within the firm is high social norms can no longer serve as a sufficient sanction against a corrupt supervisor pandemic organizational corruption tends to generate a critical mass effect the snowball effect which intensifies the corruption effect this intensified effect due to the snowballing character of social norms may more than offset the usual incentive effect of wages resulting in more widespread shirking in the firm jel classification d82 j41

income distribution and growth the kuznets hypothesis revisited this study develops a general equilibrium model in which the evolution of income inequality and output conforms with the kuznets hypothesis the paper presents a novel endogenous mechanism that generates the inverted u relation between income inequality and per capita output and captures the reciprocal influence between the two unlike previous attempts for a comprehensive theoretical modelling of this phenomenon the evolution of the economy is consistent with another important empirical observation namely that output growth is accompanied in the early stages of development by a widening wage differential between skilled and unskilled labour whereas in a later stage this wage differential declines this study develops a general equilibrium model in which the evolution of income inequality and output conforms with the kuznets hypothesis the paper presents a novel endogenous mechanism that generates the inverted u relation between income inequality and per capita output and captures the reciprocal influence between the two unlike previous attempts for a compre hensive theoretical modelling of this phenomenon the economic evolution is consistent with another important empirical observation namely that output growth is accompanied in early stages of development by a widening wage differential between skilled and unskilled labour whereas in a later stage this wage differential declines the relationship between the distribution of income and economic growth has been a focus of research for several decades in a seminal contribution kuznets 1955 explored the historical evolution of income distribution and per capita output his study demonstrated that income inequality widens in the early phase of economic growth and narrows in the later stage of development kuznets s inverted u hypothesis has been debated in the last few decades and has been confirmed by a large number of cross section empirical studies and refuted by others time series analysis indicates that the hypothesis is consist 2 ent with the experience of most of the developed world furthermore these studies suggest that output growth is accompanied in early stages of develop ment by a widening wage differential between skilled and unskilled labour and that in a later stage this wage differential declines see e g williamson 1985 throughout the years the link between income distribution and economic growth has been interpreted mostly as a causal relation from growth to income distribution recently however the nature of this link has been re examined and attention has been paid to the causality in the other direction galor and zeira 1993 have demonstrated that owing to borrowing constraints income

corruption norm violation and decay in social capital the paper studies the link between corruption and social capital measured as trust using data from a lab experiment subjects play either a harassment bribery game or a strategically identical but differently framed ultimatum game followed by a trust game in a second experiment we elicit social appropriateness norm of actions in the bribery game and ultimatum game treatments our experimental design allows us to examine whether subjects who have been asked to pay a bribe are less likely to trust than those in an isomorphic role in the ultimatum game we also uncover the underlying mechanism behind any such behavioral spillover results suggest that a there is a negative spillover effect of corruption on trust and the effect increases with decrease in social appropriateness norm of the bribe demand b lower trust in the bribery game treatment is explained by lower expected return on trust c surprisingly for both the bribery and ultimatum game treatments social appropriateness norm violation engenders the decay in trust through its adverse effect on belief about trustworthiness

corruption s direct effects on per capita income growth a meta analysis corruption is a symptom of weak institutional quality and could have potentially adverse effects on economic growth however heterogeneity in reported findings makes it difficult to synthesize the evidence base with a view to test competing hypotheses and or support evidence based policy and practice to address this issue we have extracted 327 estimates of corruption s direct effect on per capita gdp growth from 29 primary studies following a peer reviewed and pre published systematic review protocol precision effect and funnel asymmetry tests indicate that corruption has a negative effect on per capita gdp growth after controlling for publication selection bias and within study dependence however multivariate meta regression analysis results indicate that the overall effect is not robust to inclusion of moderating variables through a general to specific procedure for model specification we report that the marginal effect of corruption on per capita gdp growth is more adverse when the primary study estimates relate to long run growth are based on low income country data only and extracted from journal papers the effect is less adverse in studies that use the international country risk guide corruption perceptions index and in those reporting estimates from two stage least squares estimations

legislative organization and pollution taxation the role of political institutions in shaping public policy has been analyzed in isolation from corruption and legislative organization specifically bicameralism has received minimal attention we analyze pollution taxation when decisions are influenced by several veto players such as legislative chambers our theory predicts that an increase in the number of veto players e g moving from uni to bi cameralism pushes the pollution tax towards the social optimum with the effect being conditional on corruption as such dispersion around the optimal tax is lower under bicameralism empirical tests using data from 86 countries support the theory

bribery in international business transactions globalization leads to cross border business transactions between societies with very different norms and regulations regarding bribery bribery in international business transactions can be seen as a function of not only the demand for such bribes in different countries but the supply or willingness to provide bribes by multinational firms and their representatives this study addresses the propensity of firms from 30 different countries to engage in international bribery the study incorporates both domestic economic development culture and domestic corruption in the supplying country and international factors those countries patterns of trade and involvement in international accords in explaining the willingness to bribe abroad the propensity to provide bribes was the lowest when corruption was not tolerated in the multinational firms home countries when the firms countries were signatories of the organization for economic cooperation and development oecd anti bribery convention and when those countries traded heavily with wealthier nations further these findings are maintained when controlling for levels of economic development and cultural values in the supplying country in terms of culture firms from high power distance countries showed a somewhat greater propensity for providing bribes in transactions with less developed nations

an analytical model of farmers demand for replacement seed the purchase of new seed of a variety that a farmer is already growing varietal replacement in general and varietal choice during periods of rapid technological change are examples of seed replacement choices a seed replacement choice differs from decisions about other inputs such as fertilizer or labor in that seeds can be repro duced for the next crop season benefits from the purchase of new seed can continue for sev eral years and purchased seed is a self sustain ing input although it is subject to depreciation replacement seed is therefore in some ways analogous to a capital item rather than a variable input agricultural economists in general have considered only the analysis of varietal choice with rapid technological change theoretical nowshirvani and empirical herath har daker and anderson gafsi and roe studies of varietal choice tend to model the farmer s de cision as a single period portfolio allocation of land between modern and traditional varieties thus the attributes of interest are yield mo ments of the yield distribution and occasionally other varietal characteristics other approaches to analyzing farmers choice of seed technology emphasize how a related input fertilizer tube wells affects the level and riskiness of return feder 1980 1982 prices risk the lumpiness of the associated inputs and possible credit con straints determine the portfolio choice over time in these models in none of these approaches is the more general case of demand for replace ment seed explicitly recognized this paper proposes an analytical model of the demand for replacement seed the model describes the factors that induce a farmer to re place seed and the optimal frequency of new seed purchase given myopic and infinite time hori zons the model is applied to wheat seed de mand in pakistan conclusions limitations and possible extensions of the model are also con sidered

understanding the process of agricultural technology adoption mineral fertilizer in eastern dr congo summary we analyze the adoption of mineral fertilizer in south kivu we model technology adoption as a three step process including awareness tryout and adoption and empirically analyze these steps using cross sectional farm household data and bivariate and heckman selection probit models we find that awareness about fertilizer is high 57 and mainly determined by education and social capital tryout is low 13 of aware farmers but positively influenced by extension interventions continued adoption is high 70 of tryout farmers but capital constraints are important and not all extension interventions are effective for continued adoption our results entail implications for extension policies in poor areas

bad loans to good friends money politics and the developmental state in south korea why has the literature on asian development not addressed the issue of money politics in south korea how can we reconcile the view of an efficient developmental state in south korea before 1997 with reports of massive corruption and inefficiency in that same country in 1998 and 1999 politics is central to the answer in this study i make two arguments first money politics was extensive in south korea both during and after the high growth era second political not economic considerations dominated policymaking this study explains both past and present and compares the patterns of money politics in the early post independence era with those that arose after the democratic transition in 1987 while during the park era a balance of power between businessmen and politicians kept corruption from spinning out of control the transition to democracy altered the basic business state relationship allowing business to exert greater influence over policy decisions the political hypothesis advanced in this study suggests a new direction for our research about the developmental state

adoption and the impact of system of rice intensification on rice yields and household income an analysis for india this paper examines the determinants and impacts of the adoption of five mutually exclusive practices system of rice intensification sri on yields and household incomes using a multinomial endoge

money matters the role of yields and profits in agricultural technology adoption despite the growing attention to technology adoption in the economics literature knowledge gaps remain regarding why some valuable technologies are rapidly adopted while others are not this paper contributes to our understanding of agricultural technology adoption by showing that a focus on yield gains may in some contexts be misguided we study a technology in ethiopia that has no impact on yields but that has nonetheless been widely adopted using three waves of panel data we estimate a correlated random coefficient model and calculate the returns to improved chickpea in terms of yields costs and profits we find that farmers comparative advantage does not play a significant role in their adoption decisions and hypothesize that this is due to the overall high economic returns to adoption despite the limited yield impacts of the technology our results suggest economic measures of returns may be more relevant than increases in yields in explaining technology adoption decisions

a comparison of bribery and bidding in thin markets abstract this paper compares bribery to competitive bidding in a government purchasing context while competitive bidding is one method of procurement bribery is a common alternative in many third world countries although bribery is often considered to be the ethical antithesis of competitive bidding the analysis shows there is a fundamental isomorphism between bribery and competitive bidding on the supply side of the transaction

human capital kuznets curve with subsistence consumption level abstract we examine the human capital kuznets curve in a simple model that does not assume increasing returns to scale in human capital formation with a utility function that specifies a subsistence consumption level consumption is a necessary good and education is a luxury good as the children of poor households receive a low level of education the gap in human capital endowments expands between poor and rich households eventually economic development increases income and expenditure for education and income inequality declines

corruption centralization and the shadow economy in their pioneering work on corruption shleifer and vishny 1993 find that a centralized bureaucracy results in lower bribes our paper extends the analysis to economies with formal and informal sectors when corrupt officials operate in both sectors bureaucratic centralization is beneficial when confined to the formal sector however we show that crosssector centralization can result in higher bribes and lower welfare furthermore contrary to choi and thum 2005 we demonstrate that depending on the organization of the bureaucracy and the productivity of the informal sector the presence of the shadow economy may have adverse effects on corruption and welfare

governance and timber harvests resource economics theory implies that risks associated with weak governance have an ambiguous impact on extraction with the net impact depending on the relative strengths of depletion and investment effects previous empirical studies have found that improved governance tends to reduce deforestation but to raise oil production here we present evidence that the marginal impact of improved governance on timber harvests in developing countries during 1984 2006 was nonmonotonic it tended to raise harvests in countries with weaker governance but to reduce harvests in countries with stronger governance this nonmonotonic impact occurred for both an index of governmental integrity corruption bureaucracy quality law and order and an index of governmental stability a simulation of hypothetical increases in these governance indices to the maximum 2006 values observed in the sample predicted that improved governance would reduce harvests in most countries but could raise harvests in some with large increases occurring in countries with the weakest governance

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

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

persistent inequality an explanation based on limited parental altruism abstract this paper proposes an alternative theory for the observed persistence in income inequality across households a theory based on limited parental altruism we argue that the degree of parental altruism is limited by the economic status of the parent a poor parent not only has less ability but also has less willingness to invest in children s human capital formation this generates a non linearity in such investment expenditures as a result initial income differences may perpetuate over time even with convex technology and convex preferences in this context we also compare the efficacy of the public vis a vis the private education system from the perspective of long run growth

competition in bureaucracy and corruption abstract this paper studies the consequences of introducing competition between bureaucrats firms are supposed to invest into eliminating negative externalities of production while bureaucrats administer the process by issuing licences some bureaucrats are corrupt that is they issue a licence to any firm in exchange for a bribe the competition regime is found to create more ex ante incentives for firms to invest while the monopoly regime is better at implementing ex post allocation that is distributing the licences given the firms investment decisions additional results on the effect of punishments and bureaucrats rotation are provided

economic growth with endogenous corruption an empirical study the effect of corruption on the rate of economic growth for a panel of countries during 1984 2007 is investigated using recent improvements in dynamic panel data techniques to control for the endogeneity of corruption and investment corruption has a significant effect on the growth rate of real per capita income this effect is non linear

sequential adoption of site specific technologies and its implications for nitrogen productivity a double selectivity model this paper analyzes the sequential decision to adopt two site specific technologies soil testing and variable rate technology and the impact of adoption on nitrogen productivity the results indicate that while farm location was a key variable influencing adoption of soil testing farm size human capital and innovativeness of farmers had a significant impact on adoption of variable rate technology in four midwestern states a double selectivity model applied to correct for sample selection bias shows that adoption leads to significant gains in nitrogen productivity for farms with below average soil quality but statistically insignificant gains for farms with above average soil quality copyright 2001 oxford university press

rural finance and agricultural technology adoption in ethiopia does the institutional design of lending organizations matter summary it has now become almost a stylized fact that sustained agricultural growth is central to rapid poverty reduction and economic development yet world poverty is largely concentrated in the agrarian societies which have the potential for agricultural productivity growth this is particularly true for sub saharan african countries where the gaps between potential and actual yields remain high minimizing this gap through the promotion of modern inputs such as fertilizer and modern seeds has been at the core of almost all development strategies in ethiopia among other initiatives the country has promoted microfinance institutions and member owned financial cooperatives to alleviate credit constraints of the smallholder farmers this paper analyzes the impacts of these institutions using household survey data and a propensity score matching technique we examine the effects that institutional financial services have on farmers adoption of agricultural technology in ethiopia the results suggest that access to institutional finance has a significant positive impact on both the adoption and extent of technology use however when impacts are disaggregated by type of financial institution and farm size heterogeneities are observed in particular financial cooperatives have a greater impact on technology adoption than microfinance institutions and the results appear to vary depending on farm size and types of inputs the paper concludes with implications for policies to promote adoption of modern agricultural inputs

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

adoption of interrelated agricultural innovations complementarity and the impacts of risk scale and credit the paper presents a model of farm decisions which arise when a farm is faced with two interrelated innovations the innovations are distinguished by their returns to scale and may be adopted individually it is shown that under conditions of uncertainty or a binding credit constraint the intuitive concept of innovations complementarity may be misleading and a more relevant definition of complementarity is derived the latter helps to explain why policies which enhance adoption of one innovation may discourage adoption of the other even when the two innovations seem to complement each other

threshold effects of corruption theory and evidence summary we examine the impact of corruption on the quality of public infrastructure we propose a model in which private vendors supply governments with inputs necessary for the production of public goods asymmetric information between the two parties creates opportunities for vendors to earn profits these profits can be re distributed to government bureaucrats without impacting on the contractual form as long as firms do not operate at a loss thus corruption adversely affects the provision of public goods only when it crosses a threshold these results are examined in a sample of up to 125 countries consistent with our theory we find strong evidence of a corruption threshold

organized crime corruption and punishment we analyze an oligopoly model in which differentiated criminal organizations globally compete on criminal activities and engage in local corruption to avoid punishment when bribing costs are low that is badly paid and dishonest law enforcers work in a weak governance environment and the rents from criminal activity are sufficiently high we find that increasing policing and sanctions can generate higher crime rates indeed beyond a threshold further increases in intended expected punishment create incentives for organized crime to extend corruption rings and ensuing impunity results in a fall of actual expected punishment that yields more rather than less crime

how much does having a bank account help the poor abstracthaving a bank account is widely regarded as the first step toward financial inclusion of the poor funds deposited in a bank account are also observed to lead to higher savings exploiting

the impact of corruption on entry strategy evidence from telecommunication projects in emerging economies with globalization and the growth in emerging economies multinational enterprises mnes now frequently confront challenges associated with corrupt governments already a growing body of research has demonstrated that corruption significantly reduces a countrys aggregate inflows of foreign direct investment through its effects on firm performance we move the analysis of corruption from aggregate financial flows toward managerial theory and practice by examining how firms adjust their strategy for entering foreign markets in corrupt environments and how different types of corruption affect firms choices building on institutional theory we predict that mnes will respond to pervasive and arbitrary corruption in a host country by selecting particular types of equity and nonequity modes of entry using data on 220 telecommunications development projects in 64 emerging economies we find that firms adapt to the pressures of corruption via short term contracting and entry into joint ventures we also find that the arbitrariness surrounding corrupt transactions has a significant impact on firms decisions in addition to the overall level of corruption in contrast to extant research we show that mnes use nonequity entry modes or partnering as an adaptive strategy to participate in markets despite the presence of corruption

economic growth and the quantity and distribution of education a survey the focus of this survey is to discuss different attempts at incorporating the distributional dimension of human capital into the theoretical and empirical growth framework we present a series of models which deviate from the direct link between the aggregate or average level of human capital and economic growth in that they introduce the distribution of education as a new element in explaining the relationship under investigation after surveying the theoretical literature we present recent empirical work on the relation between economic performance and the average level as well as the distribution of education respectively

a note on competitive bribery games abstract within a competitive bribery game in which each player has incomplete information we show that there exists a unique nash equilibrium which is symmetric similar results hold for another bribery game form that prevails in the literature implications for corrupt practices in relation to economic development are also discussed

national culture and corporate debt maturity abstract we investigate the influence of national culture on corporate debt maturity choice based on the framework of williamson we argue that culture located in social embeddedness level can shape contracting environments by serving as an informal constraint that affects human actors incentives and choices in market exchange we therefore expect national culture to be related to debt maturity structure after controlling for legal political financial and economic institutions using hofstede s four cultural dimensions uncertainty avoidance collectivism power distance and masculinity as proxies for culture and using a sample of 114 723 firm years from 40 countries over the 1991 2006 period we find robust evidence that firms located in countries with high uncertainty avoidance high collectivism high power distance and high masculinity tend to use more short term debt we interpret our results as consistent with the view that national culture helps explain cross country variations in the maturity structure of corporate debt

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

is more competition always better an experimental study of extortionary corruption using a laboratory experiment we assess whether increasing competition among public officials reduces extortionary corruption we find that increasing the number of providers has no effect on bribe demands when citizens search costs are high but it increases corruption when search costs are low the effect is absent in a parallel setting framed as a standard market which we attribute to citizens using a nonsequential search strategy as opposed to sequential search in the corruption setting we conclude that efforts to reduce search costs such as infrastructure investments are preferable to anti corruption policies aimed at increasing the number of providers jel d73 d49 c91

agricultural transformation in africa assessing the evidence in ethiopia summary despite significant efforts africa has struggled to imitate the rapid agricultural growth that took place in asia in the 1960s and 1970s as a rare but important exception ethiopia s agriculture sector recorded remarkable rapid growth during 2004 14 this paper explores this rapid change in the agriculture sector of this important country the second most populous in africa we review the evidence on agricultural growth and decompose the contributions of modern inputs to growth using an adjusted solow decomposition model we also highlight the key pathways ethiopia followed to achieve its agricultural growth we find that land and labor use expanded significantly and total factor productivity grew by about 2 3 per year over the study period moreover modern input use more than doubled explaining some of this growth the expansion in modern input use appears to have been driven by high government expenditures on the agriculture sector including agricultural extension but also by an improved road network higher rural education levels and favorable international and local price incentives

shadow economies size causes and consequences using various methods the size of the shadow economy in 76 developing transition and oecd countries is estimated average size varies from 12 percent of gdp for oecd countries to 23 percent for transition countries and 39 percent for developing countries increasing taxation and social security contributions combined with rising state regulations are driving forces for the increase of the shadow economy especially in oecd countries according to some findings corruption has a positive impact on the size of the shadow economy and a growing shadow economy has a negative effect on official gdp growth

corruption inequality and fairness bigger governments raise the possibilities for corruption more corruption may in turn raise the support for redistributive policies that intend to correct the inequality and injustice generated by corruption we formalize these insights in a simple dynamic model a positive feedback from past to current levels of taxation and corruption arises either when wealth originating in corruption and rent seeking is considered unfair or when the ability to engage in corruption is unevenly distributed in the population this feedback introduces persistence in the size of the government and the levels of corruption and inequality multiple steady states exist in some cases

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

eight questions about corruption this paper will discuss eight frequently asked questions about public corruption 1 what is corruption 2 which countries are the most corrupt 3 what are the common characteristics of countries with high corruption 4 what is the magnitude of corruption 5 do higher wages for bureaucrats reduce corruption 6 can competition reduce corruption 7 why have there been so few recent successful attempts to fight corruption 8 does corruption adversely affect growth

regulation and distrust in a cross section of countries government regulation is strongly negatively correlated with social capital we document this correlation and present a model explaining it in the model distrust creates public demand for regulation while regulation in turn discourages social capital accumulation leading to multiple equilibria a key implication of the model is that individuals in low trust countries want more government intervention even though the government is corrupt we test this and other implications of the model using country and individual level data on social capital and beliefs about government s role as well as on changes in beliefs and in trust during the transition from socialism

estimating the performance effects of business groups in emerging markets business groups confederations of legally independent firms are ubiquitous in emerging economies yet very little is known about their effects on the performance of affiliated firms we conceive of business groups as responses to market failures and high transaction costs in doing so we develop hypotheses about the effects of group affiliation on firm profitability affiliation could either boost or depress firm profitability and members of a group are likely to earn rates of return similar to other members of the same group using a unique data set compiled largely from local sources we test for these effects in 14 emerging markets argentina brazil chile india indonesia israel mexico peru the philippines south africa south korea taiwan thailand and turkey we find evidence that business groups indeed affect the broad patterns of economic performance in 12 of the markets we examine group affiliation appears to have as profound an effect on profitability as does industry membership yet strategy scholars have a much clearer grasp of industries than of groups moreover membership in a group raises the profitability of the average group member in several of the markets we examine this runs contrary to the wisdom conventional in advanced economies that unrelated diversification depresses profitability overall our findings suggest that the roots of sustained differences in profitability may vary across institutional contexts conclusions drawn in one context may well not apply to another copyright 2001 john wiley sons ltd

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

corruption and market competition evidence from post communist countries summary this paper empirically examines whether market competition is associated with greater bribe payments we use firm level data from the business environment and enterprise performance surveys since market competition could be endogenous and some firms report zero bribes we employ a tobit estimation methodology instrumenting for market competition we find that greater market competition increases the amount of bribes paid results are robust across several measures of market competition however market competition is less strongly associated with bribes in the presence of other obstacles of doing business that could also lead to more bribes

the empirical measurement of rent seeking costs this survey focuses on the efforts carried out mainly by public choice scholars to measure the social cost of rent seeking the concept introduced by gordon tullock in 1967 and coined by anne krueger in 1974 is well known and accepted by the profession but its empirical measurement has fallen behind with respect to its theoretical formulation an often criticized lack in the literature although there are good general surveys none has specifically focused on reviewing the empirical efforts made to measure the phenomenon the purpose of this paper is to provide such a survey it could be said that the rent seeking concept has been fully integrated into economic jargon it is commonly used when some agent seeks to obtain an artificial transfer usually from government and covers all the actions efforts or expenses that the agent has to carry out to obtain the prize the key issue however is the possible social waste that arises in these situations the empirical efforts to measure such waste constitute the main purpose of this survey the concept of rent seeking was introduced by tullock 1967 although the term was first coined by krueger 1974 in a paper not related to the former in a recent paper tullock himself wrote of the history of the concept and the intellectual context within which it arose tullock 2003 starting with the pioneering work by harberger 1954 several studies were conducted during the 1950s in which the calculation of the social cost of monopolies and tariffs always gave the result of very modest figures the first response to these results was made by leibenstein 1966 and his x efficiency which refers to a hypothetical loss in efficiency due to the absence of competition shortly after leibenstein s paper appeared tullock argued that the deadweight costs of monopoly and tariffs understate the true social cost because the expenditures made to capture related rents have to be included so rectangles as well as harberger s triangles have to be included in the calculations let us see this argument once more figure 1 depicts the iconic tullock graphic analysis of rent seeking it represents the demand schedule d for a monopolized good where pm is the monopoly

fluidity of regulation csr nexus the multinational corporate corruption example corporate social responsibility csr is a relatively undeveloped concept despite its increasing importance to corporations one difficulty is the possible inexactness of csr another is the apparent reluctance by regulatory authorities and policy makers to intervene in the area this is largely a result of inhibitions created by traditional approaches to company law with emphasis on shareholder protection and financial disclosure the consequence is the stultification of independent development of csr by tying social issues to financial performance this attitude might not be unconnected to the theoretical and practical challenges in justifying csr and defining its scope the underlying impediment is a factual and theoretical failure to distinguish instrumental and pure ethical csr this article demonstrates that ethical csr highlights the role of regulation and a principal stance is that regulation is neither incompatible nor irreconcilable with ethical csr the article argues that cognizance of the intrinsic moral justification of pure csr is required for delineating the scope of csr as well as for clarifying the desirability and extent of its regulation it argues that the dynamic history and visage of multinational corporate corruption illuminates the fluidity of the regulation csr relationship the current and widening backlash against transnational corporate corruption is arguably a demonstration of the position that regulation and csr are not mutually exclusive and absolute concepts this article submits that recognition and application of this ethical and instrumental csr distinction is fundamental to the development of csr and resolution of connected questions of regulation

the market for public office why the indian state is not better at development abstract how and why officials are transferred from one post to another can in india does have far reaching consequences for the effectiveness of public service organizations such as irrigation agriculture forestry and soil conservation departments the transfer mechanism used in many departments of indian states involves a kind of internal labor market a truer market than in the way that term is often used by labor market economists it allows pressures for corrupt behavior to bear down on the incumbents of certain posts and itself amplifies those pressures frequently the pressures on officials to be corrupt cause them to behave in ways contrary to the ostensible objectives of their departments why is the indian state not better at promoting development to an important degree because of the corruption transfer mechanism and its effects on bureaucratic initiatives

a theory of misgovernance this paper tries to explain why government bureaucracies are often associated with red tape corruption and lack of incentives the paper identifies two specific ingredients that together can provide an explanation the fact that governments often act precisely in situations where markets fail and the presence of agency problems within the government we show that these problems are exacerbated at low levels of development and in bureaucracies dealing with poor people we also argue that we need to posit the existence of a welfare oriented constituency within the government in order to explain red tape and corruption

the duality of crony corruption in economic transition toward an integrated framework in order to shed light on the issue of crony corruption in the context of economic transition i focus on the puzzle of china s unique experience of economic transition characterized by the duality forms and effects of crony corruption underlying local corporatism in a dual track i e market and political tracks transition i argue that the duality of local corporatism derives from the duality of crony corruption first the early form of local corporatism as state business public alliance is embedded in informal crony corruption as positive for the purpose of wealth growth in the initial phase of economic transition with public and private interests aligned as compatible second the later form of local corporatism as official manager private collusion is embedded in quasi formal crony corruption as negative for the purpose of wealth transfer in the later phase with public and private interests in conflict as incompatible the duality of crony corruption in the two phases of economic transition is caused by the interplay between formal and informal factors and between economic and political factors my contribution is twofold first i explain china s transition in terms of crony corruption underlying local corporatism second i develop an integrated framework of crony corruption concerning its content process antecedent and consequence

how corruption may corrupt abstract the incidence of corruption appears to vary strongly across societies even for comparable activities the model highlights how the profitability of bureaucratic corruption may be related to its frequency and points toward a few mechanisms that can be used in explaining the stylized facts of varying incidence of corruption there might be multiple self fulfilling equilibria levels of corruption even when both supply and demand of corrupt acts are considered

bipolar multicandidate elections with corruption the goals of democratic competition are not only to implement a majority s preference on policy questions but also to provide a deterrent against corrupt abuse of power by political leaders we consider a simple model of multicandidate elections in which different electoral systems can be compared according to these two criteria among a wide class of single winner scoring rules only approval voting is found to satisfy both effectiveness against corruption and majoritarianism for this 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

why firms engage in corruption a top management perspective this study builds upon the top management literature to predict and test antecedents to firms engagement in corruption building on a survey of 341 executives in india we find that if executives have social ties with government officials their firms are more likely to engage in corruption further these executives are likely to rationalize engaging in corruption as a necessity for being competitive the results collectively illustrate the role that executives social ties and perceptions have in shaping illegal actions of their respective firms

income distribution and macroeconomics the persistence of inequality in a convex technology framework i show that non convexities in technology assumed in the capital market imperfection literature on the relationship between income distribution and economic development can be replaced by an assumption that the bequest function is convex with respect to income 2002 elsevier science b v all rights reserved

institutional framework and economic development international evidence this paper examines the effect of quality of the institutional framework on economic development our empirical results support the hypothesis that good institutions improve efficiency and accelerate growth the positive effect of institutional quality is more pronounced with mutually reinforcing support of economic freedom our results also indicate that good institutions help developing countries grow faster to achieve conditional convergence we infer from the results that economic development requires not only physical and human capital formation but also freedom to choose and institutional support

increasing returns human capital and the kuznets curve abstract we present a simple model of human capital accumulation which generates the kuznets curve as an equilibrium outcome the central ingredient that helps generate the kuznets curve in the model is what we call short run increasing returns to scale in the learning technology the learning technology exhibits increasing returns to scale but only in the short run since one of the factors of production time is bounded above by the endowment we show that short run increasing returns to scale is necessary to obtain the kuznets curve but not sufficient

subsistence substitutability and sustainability in consumption we propose a representation of individual preferences with a subsistence requirement in consumption and examine its implications for substitutability and sustainability specifically we generalize the standard constant elasticity of substitution ces utility specification for manufactured goods and environmental services by adding a subsistence requirement for environmental services we find that the hicksian elasticity of substitution strictly monotonically increases with the consumption of environmental services above the subsistence requirement and approaches the standard ces value as consumption becomes very large whether the two goods are market substitutes depends on the level of income we further show that the subsistence requirement may jeopardize the existence of an intertemporally optimal and sustainable consumption path our results have important implications for growth development and environmental policy

costs of distrust the virtuous cycle of tax compliance in jordan tax compliance has been extensively researched yet the classic question why do people pay taxes remains unanswered in jordan tax evasion is widespread the state and citizens have been trapped in a continuous hide and seek game which has taken the form of a virtuous cycle this paper investigates tax evasion along with the most noticeable features of the jordanian tax system it also highlights how the virtuous cycle of tax evasion has been established and what could possibly be a way out of it we argue that sociocultural values are the most prominent cause for tax evasion that is the procedures of state formation and functionality in jordan have created mutual distrust between the state and its citizens having been raised in a community characterized by deep distrust tax evasion is no longer considered immoral by substantial numbers of the jordanian population we argue that successive governments need to create a high trust based culture and formulate strategies that serve to acquire normative ethical values in order to enhance voluntary compliance the way to accomplish this necessity is through enforcing the state s transparency and accountability the taxation system needs to concentrate on income tax rather than raise tax rates on essential commodities to collect substantial tax revenues thus further reform of the taxation system along with a reduction in tax incentives need to be considered moreover lowering the exceptionally high personal income tax threshold would bring jordan in line with its peers expand the base and introduce more progressivity there would also be a scope to introduce a minimum tax based on sales as a tool to address tax evasion

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

persistence of corruption some theoretical perspectives summary the paper examines how pervasive corruption can be persistent despite the presence of anti corruption measures and incentives corruption has a strong tendency to persist in the first part we discuss how a high level of corruption or a low level of compliance can be an equilibrium outcome in such a case corruption becomes the social norm in the second part of the paper we use ides from evolutionary game theory to discuss how corrupt behavior can be immune to interventions and it can sustain itself against different individual behavioral norms

who gains from non collusive corruption non collusive corruption i e corruption that imposes an additional burden on business activity is particularly widespread in low income countries we build a macroeconomic model with credit market imperfections and heterogeneous agents to explore the roots and consequences of this type of corruption we find that credit market imperfections by generating rents for the incumbent entrepreneurs create strong incentives for corrupt behavior by state officials however non collusive corruption not only redistributes income from non officials towards officials but also within the group of potential entrepreneurs if borrowing is limited bribes prevent poorer but talented individuals from starting a business but this is likely to benefit those who may enter anyway the cost of capital is lower and there is less competition on the goods markets

corruption and the political economy of resource based development a comparison of asia and sub saharan africa we model how the supply and demand for bribes affects resource use by an economy and the reinvestment of resource rents in other assets this requires adjusting the world bank s measure adjusted net savings for any rent dissipation due to corruption the impacts of corruption on long run changes and periodic growth in the adjusted net savings rate are estimated across african and asian economies from 1970 to 2003 corruption rather than resource dependency per se affects negatively the ability of african countries to reinvest resource rents in the short term but for asian countries corruption is less important than point resources corruption influences long run growth in adjusted net savings rates in all countries and is also the pathway through which this growth is affected by patterns of resource use trade and abundance

international integration and national corruption we argue that greater degrees of international integration lead to lower levels of corruption which we define as the misuse of public office for private gain we theorize that international factors affect a country s level of corruption through two principal channels one acts through economic incentives altering for various actors the costs and benefits of engaging in corrupt acts the second mode is norma tive prevailing norms in international society delegitimate and stigmatize corrup tion countries that are more integrated into international society are more exposed to economic and normative pressures against corruption we therefore test the fol lowing hypothesis the more a country is tied into international networks of ex change communication and organization the lower its level of corruption is likely to be the analysis of data from approximately 150 countries strongly confirms our expectation

how corruptible are you bribery under uncertainty abstract we model corruption in a society as a result of bargaining for bribes between private citizens and public officials we investigate the role that incomplete information with respect to the intrinsic moral cost of one s potential corruption partner plays out in his or her propensity to engage in bribery and consequently the equilibrium level of corruption in the society we assume that the cost of engaging in corruption is subject to strategic complementarities which may lead to multiple corruption equilibria we find that corruption is lowest when potential bribers and potential bribees are uncertain regarding each other s corruptibility and have asymmetric bargaining powers our uncertainty result provides theoretical support in favor of anti corruption strategies such as staff rotation in public offices aimed at decreasing the social closeness of bribers and bribees our bargaining power result suggests that under uncertainty monopolistic public good provision has the same corruption reducing effect as competitive public good provision

integrity for hire an analysis of a widespread customs reform abstract can governments improve bureaucratic performance by hiring integrity from the private sector in the past 2 decades a number of developing countries have hired private firms to conduct preshipment inspections of imports generating independent data on the value and tariff classification of incoming shipments i find that countries implementing such inspection programs subsequently experience large increases in import duty collections by contrast the growth rate of other tax revenues does not change appreciably additional evidence suggests that declines in falsification of import documentation are behind the import duty improvements the programs also lead to declines in undervaluation and misreporting of goods classifications historically this hired integrity appears to have been cost effective with improvements in import duty collections in the first 5 years of a typical inspection program amounting to 2 6 times the program s costs

modeling multiple adoption decisions in a joint framework a multinomial probit mnp model is applied to the modeling of adoption decisions by farmers facing multiple technologies which can be adopted in various combinations this model allows for full investigation of the interactions between decisions to adopt or not adopt several technologies estimation is carried out in a bayesian framework employing gibbs sampling to circumvent past difficulties encountered in maximum likelihood estimation of the mnp model the model is estimated for a sample of u s apple growers with four possible sustainable production technology bundles the results show that adoption decisions are most significantly influenced by off farm labor supply

do existing corruption levels matter in controlling corruption cross country quantile regression estimates abstract we examine the determinants of corruption using recent cross sectional data for nearly one hundred countries while the causes of corruption have drawn economists interest in recent years our main contribution is to examine the corruption determinants throughout the conditional distribution of corruption across nations are there different causes of corruption in highly corrupt nations compared to the least corrupt countries for instance we examine whether greater democracy and more economic freedom consistently reduce corruption among the most and the least corrupt our results for the significant determinants support some findings in the literature but also provide new conclusions in many cases quantile regression estimates are quite different from those from ols regressions among the most corrupt nations larger governments and greater economic freedom do not appear to reduce corruption but greater democracy seems to alleviate it our results suggest that some current corruption control policies may be reconsidered especially among the most corrupt and least corrupt nations

does competition kill corruption corrupt agents officials or gangsters exact money from firms corruption affects the number of firms in a free entry equilibrium the degree of deep competition in the economy increases with lower overhead costs relative to profits and with a tendency toward similar cost structures increases in competition may not lower corruption the model explains why a rational corrupt agent may extinguish the source of his bribe income by causing a firm to exit assessing the welfare effect of corruption is complicated by the fact that exit caused by corruption does not necessarily reduce social welfare