securitization of taxes implicit in payg pensions to preserve solvency a pay as you go payg pension system needs to adjust contribution rates and pension promises over time currently it is not possible to hedge in the financial market against politically determined uncertainty as regards these parameters i consider a policy reform whereby property rights are established on the implicit lifetime tax levied by payg finance and are assigned to the pension institution these property rights are well defined if the reform also features rule based allocation of aggregate risk in the form of defined contribution or defined benefit schemes i show that a payg pension system may indeed be instantly restructured so as to minimize political risk and allow financial market diversification of risk a side benefit is securitization of human capital flows which are not traded in existing financial markets the new securities if traded in appropriately competitive financial markets are complementary to the notional account reforms of the 1990s however fiscal instability can increase if securitization is implemented in the absence of initial solvency and credible adoption of rule based methods to allocate aggregate risk salvador valdes prieto

monopoly vs competition in light of extraction norms this note demonstrates that whether the market is competitive or monopolistic need not be the result of ideology political power or non convexity of the technology the answer can be determined by a government that maximizes the extracted resources from the alternative market structures our claim is illustrated by assuming that demand and supply are linear functions and that the government can extract the same share of the producers profit under the alternative market structures this share can be extracted from the actual producers or from the potential producers who take part in the contest to get a license to produce

the role of wages and auditing during a crackdown on corruption in the city of buenos aires abstract we study the prices paid for basic inputs during a crackdown on corruption in the public hospitals of the city of buenos aires argentina during 1996 97 we find a well defined negative effect on the measures used to capture corruption prices paid by hospitals for basic homogeneous inputs decrease by 15 percent during the first 9 months of the crackdown after this period prices increase but they are still 10 percent lower than those prevailing before the crackdown relative to the precrackdown period higher wages play no role in inducing lower input prices when audit intensity can be expected to be maximal during the first phase of the crackdown but have a negative and well defined effect when audit intensity takes intermediate levels the last phase of the crackdown controlling for fixed effects we find that the wage elasticity of input prices exceeds 20 these results are consistent with the standard model of bribes of gary becker and george stigler

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

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

self enforcing intergenerational transfers and the provision of education this paper considers intra family financing of human capital under the assumptions that individuals are selfish and binding contracts are not feasible cooperation among family members is possible through a family norm a family social capital which prescribes the obligations to be met at each stage in life and sanctions for those who deviate we characterize the set of self enforcing transfers and show that there is a downward bias in the family provision of education this gives a rationale for public action as a remedy to the lack of commitment between selfish family members

estimating willingness to pay for improved water quality in the presence of item nonresponse bias this article deals with the problem of item nonresponse in contingent valuation surveys using a payment card method by applying a grouped data sample selection estimation technique that is capable of imputing the missing values conditional upon a respondent s decision to answer a willingness to pay question the advantage of the technique lies in its ability to utilize all of the information in the sample permitting a more efficient estimation in the presence of item nonresponse bias the major determinants of willingness to pay appear to be household income number of children education perception of existing water quality and identification with environmental issues copyright 2003 oxford university press

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

firm growth and corruption empirical evidence from vietnam this paper tests whether firm growth reduces corruption using data from over 10 000 vietnamese firms we employ instrumental variables based on growth in a firm s industry in other provinces within vietnam and in china we find that firm growth reduces bribes as a share of revenues we propose a mechanism for this effect whereby government officials decisions about bribes are modulated by inter jurisdictional competition this mechanism also implies that growth reduces bribery more for more mobile firms consistent with this prediction we find a larger effect for firms with transferable rights to their land or operations in multiple provinces this article is protected by copyright all rights reserved

ageing and the welfare state securing sustainability over the next four decades increasing old age dependency ratios will exert an enormous upward pressure on welfare spending in most developed countries as this is mainly due to existing unfunded public pension schemes many countries have embarked on far reaching reforms in this area strengthening actuarial fairness modifying indexation rules adding elements of pre funding and last but not least attempting to extend the period of economic activity efforts to contain costs may also be relevant with regard to public expenditure on health and long term care but thus far no country has started to really deal with these issues still some countries have made substantial progress in securing the long term sustainability of their welfare systems what remains to be considered is re constructing the system of intergenerational transactions as a potential way of removing disincentives to raise children and invest in their human capital in the long run

the value of children inter generational support fertility and human capital abstract this paper offers robust empirical evidence of a darwinian pro natalist mechanism parents can improve their old age support with an additional child using the incidence of first born twins as an instrument for fertility outcomes i find that chinese senior parents with more children receive more financial transfers and are more likely to co reside with an adult child they are also less likely to work past retirement age the estimated effects are large despite the evidence that adult children from larger families are less educated and earn significantly less interestingly the effect of an increase in the number of children on old age support does not depend on the child s gender

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

ecosystem service value assessment for constructed wetlands a case study in hangzhou china abstract based on a comprehensive analysis of various classifications of natural resource values we summarized an ecological economic value system of constructed wetland cw ecosystems for treating eutrophic water using the cw located at the hangzhou botanical garden as an example the contingent valuation method cvm and shadow project approach spa were applied to estimate the economic values of cw system ecosystem services the cvm estimated a value of 800 000 yuan yuan chinese currency 7 6 yuan 1 usd as of august 2007 as the total economic value of the cw in a twenty year period meanwhile the spa calculated a value of 23 04 million yuan as the total economic value of the cw in a twenty year period it is determined that compared to the cvm the spa provides a more approximate value of the true monetary value of the hangzhou botanical garden cw this study could fill the gap of knowledge and provide a benchmark when evaluating constructed ecosystem services and help policy makers to promote the development of constructed wetlands in china

international differences in saving rates and the life cycle hypothesis this paper demonstrates that life cycle and demographic variables explain about two thirds of the observed variation in the saving rates of oecd nations during the 1970s they explain more of the variation in the household than the national saving rate and much more when the sample is weighted by population than when it is not finally the study demonstrates that the labor force participation rate of the working age population is an important determinant of the aggregate saving rate

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

corruption product market competition and institutional quality empirical evidence from the u s states this article argues that the effect of corruption on competition is dependent on the institutional environment when institutions are relatively efficient observed corruption is likely to be associated with relatively less competition conversely in areas with low quality institutions e g excessively burdensome regulations corruption may lead to relatively more competition i employ unique data on competition corruption and institutional quality across u s states from 1997 to 2009 and report that a higher level of corruption is associated with relatively more competition in states with low levels of institutional quality however as institutional quality improves the effect of corruption worsens thus institutional quality is a fundamental determinant of the corruption competition relationship improving institutional quality while at the same time reducing corruption will increase competition and likely improve economic outcomes jel d73 o17 l26

globalisation and corruption revisited this paper presents new empirical evidence on the determinants of corruption focussing on the role of globalization and inequality the estimates for a panel of 102 countries over the period 1995 2005 point to three main results i detection technologies reflected in a high level of development human capital and political rights reduce corruption whereas natural resource rents increase corruption ii globalization in terms of both trade and financial openness has a negative eect on corruption which is more pronounced in developing countries iii inequality increases corruption and once the role of inequality is accounted for the impact of globalization on corruption is halved in line with recent theory this suggests that globalization besides reducing corruption through enhanced competition aects corruption also by reducing inequality

does firm growth increase corruption evidence from an instrumental variable approach prior literature on the role that firm heterogeneity plays in corruption finds that larger firms pay smaller bribes and are less likely to pay bribes than smaller firms these studies however often overlook the plausible reverse causality between firm growth or firm size and corruption utilizing an innovative identification strategy that accounts for this source of endogeneity this study finds that increased firm size actually causes greater corruption and bureaucratic burdens on a typical firm and provides evidence against the argument for a uniform corruption burden regardless of size it was determined that a one standard deviation increase in sales leads to 0 33 standard deviation increase in bribes and to 0 36 standard deviation increase in management time spent dealing with public officials moreover although corruption burden increases with increasing firm size we find that this relationship is non linear and diminishes in magnitude as firm size approaches to medium and large we conclude with implications and policy considerations

taxing family size and subsidizing child specific commodities abstract the effects and optimal choice of policy instruments directly affecting the welfare of parents and children are examined within the context of a household economics model if fertility were exogenous and households differed in number of children only a first best could be implement through a grant conditional on family size outside this very special case public intervention is either not justifiable on distributional grounds or involves taxing child specific commodities less than adult specific commodities if fertility is endogenous family size must be taxed or subsidized according to whether household expenditure on children is decreasing or increasing in the mother s wage rate

bribery inefficiency and bureaucratic delay abstract we examine bribery in a dynamic setting with a partially honest bureaucracy the presence of honest officials lowers the bribe that a corrupt official can extract from efficient applicants consequently efficient applicants may face delays in receiving licenses or may never receive licenses as inefficient applicants are serviced ahead of them an increase in the proportion of honest officials while directly increasing the incidence of socially optimal decisions can also induce greater inefficiencies misallocation and delay from corrupt officials as a result social welfare may be non monotonic in the proportion of honest officials and small differences in monitoring costs may lead to very different levels of corruption competition between officials can hurt efficiency its desirability depends on the prevalence of applicants ability to pay bribes

corruption top down or bottom up this article studies the impact of corruption on an economy with a hierarchical government in particular we study whether centralizing corruption within the higher level of government increases or decreases the total amount of corruption we show that when the after tax relative profitability of the formal sector as compared to that of the informal sector is high enough adding a layer of government increases the total amount of corruption by contrast for high enough public wages and or an efficient monitoring technology of the bureaucratic system centralization of corruption at the top of the government hierarchy redistributes bribe income from the lower level to the upper level in the process total corruption is reduced and the formal sector of the economy expands

mortality fertility and persistent income inequality many developing countries are characterized by high and persistent inequality in the distribution of income while a growing body of literature emphasizes differential fertility as a channel through which income inequality persists this paper investigates differential child mortality differences in the incidence of child mortality among different income groups as a critical link in this regard we incorporate both endogenous child mortality and endogenous fertility in an overlapping generations model we demonstrate that differential child mortality and its interaction with differential fertility can generate an income inequality trap where high risk of child death prevents poor households from adequately investing in education empirical evidence based on cross country micro data support differential child mortality as an important channel for the transmission of inequality as predicted by the model from a policy perspective the results suggest that better access to child health care may be a more promising way to reduce income inequality than providing incentives to lower the family size of poor households

validation of empirical measures of welfare change a comparison of nonmarket techniques since the passing of the flood control act of 1936 the attention of many resource economists has been directed towards measuring the benefits and costs of alternative uses of natural resources increasingly it has been recognized that the value of some of these uses is not explicitly determined through market transactions this has led to the focus of much attention upon the development of nonmarket methods to estimate the value of these uses in the 1940s the groundwork for the travel cost method was established by hotelling prewitt 1949 following this in the 1960s davis initiated the basic foundation for bidding methods davis 1963 which were later to be subsumed under the heading of contingent valuation methods brookshire randall and stoll 1980 schulze d arge and brookshire 1981 thayer 1981 both of these methods will be further discussed below in addition to these two methods a third approach the unit day value method has been recognized as acceptable but not preferred for the valuation of recreational uses of water and related land resources dwyer kelley and bowes 1977 u s water resources council 1979 given the existence of alternative methods of estimating the value of resource uses several obvious questions arise one of the first of these is under what circumstances is each method most appropriate existing literature has focussed sufficiently on this question and pointed out limitations of each especially the travel cost method and unit day value methods brookshire ives and schulze 1976 dwyer kelly and bowes 1977 freeman 1979 mcconnell 1975 randall ives and eastman 1977 schulze d arge and brook

a meta analysis of contingent valuation forest studies abstract forest ecosystems provide a variety of valuable goods and services this paper presents a meta analysis of forest studies using the contingent valuation cv method to value the provision of forest values around the world in this meta analysis we estimate the marginal value of different management programs that provide a variety of forest goods and services our results show that willingness to pay wtp estimates for forest management programs are sensitive to the program s objectives particularly when linked to the provision of recreational services other variables such as the type of forest location survey mode or the type of respondent were also found to significantly affect the wtp estimates

stated preferences real behaviour and anchoring some empirical evidence we compare different contingent valuation question formats with each other and with observed behaviour for a non monetary estimation task the expected number of kilometers travelled by automobile open ended questions open ended follow up questions dichotomous choice dc questions and double bound dc questions are included the single and double bound dc questions result in an estimated mean about twice as high as the actual value and the open ended mean the dc question overestimation seems to be due to an anchoring effect leading to yea saying behaviour our results about the difference between dc questions and open ended questions is consistent with the pattern observed in contingent valuations studies of the willingness to pay our results indicates that dc questions seem to be associated with a general overestimation problem that is present even for simple non monetary estimation tasks

alternative approaches for incorporating respondent uncertainty when estimating willingness to pay the case of the mexican spotted owl abstract this paper explores the sources and patterns of respondents uncertainty regarding their willingness to pay wtp and presents alternative approaches for incorporating this uncertainty into estimation of the logit model recently proposed approaches are compared to methods proposed in this paper which allows for incorporation of uncertainty regarding both yes and no responses these approaches are evaluated by comparing the goodness of fit and variability of mean wtp extreme recoding of uncertain yes responses as no responses reduces the logit goodness of fit and the precision of the wtp estimate incorporating the degree of uncertainty of yes responses results in the highest goodness of fit and the smallest variability of mean wtp among the various models addressing uncertainty a regression model is used to determine the significant determinants of respondent uncertainty

the effect of house price on fertility evidence from hong kong i introduction the mechanism underlying the demographic transition coinciding with industrialization still remains an unresolved debate in economics and demography early contributions to the new family economics formulated the choice of fertility into the beckerian time allocation model and derived that the secular decline of fertility rates in developed countries over the past 50 yr was mainly attributed to the increase of the opportunity cost of childbearing and rearing represented by the increase of female education levels wage rates and labor force participation rates becker 1960 1991 willis 1973 although this negative relationship between fertility rates and female labor market activities has been verified by later empirical studies butz and ward 1979 heckman and walker 1989 1990 it cannot fully explain the demographic transition pattern in western europe and elsewhere as contended by becker and murphy 2000 an illustration in point of the insufficiency of this female labor market story comes from the demographic transition pattern that has occurred with the east asian tigers during the past four decades while these four economies south korea taiwan hong kong and singapore have experienced both economic takeoff and fertility decrease synchronously macunovich 2000 their female labor market behavior changed mildly and female labor force participation rates flfprs are still much lower than their western counterparts 1 the typical representation of this new demographic transition pattern happened in hong kong on the one hand the economy of hong kong has been booming and has experienced one of the fastest per capita gross domestic product gdp growth rates around the world in the past four decades however the total fertility rate tfr has sharply decreased by 75 at the same period from 3 459 in 1971 downward to 966 in 2005 one of the lowest in the world and far below the required replacement level of 2 100 2 on the other hand however the extent to which the female labor market behavior has responded to the economic prosperity has been very limited for example the flfprs just increased from 42 8 in 1971 to 52 0 in 2005 3 since it is unbelievable that a 9 2 increase of flfprs is the primary driving force for the almost 75 decrease of tfrs other factors influencing the shadow price of childbearing and rearing should also be taken into account 4 the dominant factor responsible for the drastic decrease of fertility rates in hong kong suggested by the present article is the house price hp the justification of the hp into a fertility decrease story involves the standard income and substitution effects first of all the increase of hps impoverishes parents and exerts a negative income effect on the demand for children in the standard economic theory of fertility becker 1991 following the conventional practice in which the child is assumed to be a normal good the negative income effect decreases the demand for children second hp is a part of the shadow price for children the increase of the hp should also decrease the demand for children in the hicksian sense and this negative compensated substitution effect reinforces the pure negative income effect overall both effects may cause many relatively young or poor households to be unable to afford to set up a household in a lifecycle context consequently to the extent that owning house or renting house of a sufficient size may be a precondition for having children many such households may be highly constrained to have any children at all for relatively wealthy couples rising housing prices would diminish the house size they could afford to buy or to rent and decrease the demand for children accordingly more importantly the magnitude of the increase of hp may be large enough to trigger the sharp decrease of fertility rates in hong kong in fact the growth rates of hps have dominated the growth rates of both real per capita gdp and real wage rates during the past four decades

competition and the reform of incentive schemes in the regulated sector abstract we consider a regulation problem with complete contracting in a principal agent model with adverse selection and review within this model the various channels by which external competition parameters affect incentives within the regulated firm the channels are the principal s information the principal s objective function the agent s incentive constraint the agent s participation constraint we consider in particular a better information structure a threat of liquidation a fight for talent a more efficient private sector and the existence of better substitutes we characterize in each case the conditions under which the effect on incentives is positive

free entry and social inefficiency our goal is to provide a simple yet general exposition of the conditions under which the number of entrants in a free entry equilibrium is excessive insufficient or optimal our analysis compares the number of firms that enter a market when there is free entry with the number that would be desired by a social planner who is unable to control the behavior of firms once they are in the market that is we consider the second best problem of choosing the welfare maximizing number of firms while we take as given their noncompetitive behavior after entry we demonstrate that the crucial conditions for establishing the presence of an entry bias can be stated quite simply in terms of the outcome of the postentry game played by entrants in contrast to previous work we do not need to model this postentry game explicitly

competition and corruption in an agency relationship abstract the paper reconsiders the relationship between competition and corruption in a model where corruption has solid informational foundations and where the regulatory response to the possibility of corruption is taken into account it is shown that the effect of greater competition on corruption depends on the complementarity or substitutability of the two instruments available to decrease information rents namely low powered incentives and greater competition the paper concludes with a brief empirical exploration of the relationship between competitiveness and corruption on african data

productivity growth and the political economy of social security the present paper provides an analysis of unfunded social securityas the outcome of a public decision making process in an endogenousgrowth economy it employs a model in which there is a non monotonic relationship beween productivity growth and the scale ofpublic intergenerational redistribution the paper shows thatalthough unfunded social security need not harm growth in general it is likely to harm growth in a democracy this effect isreinforced by population aging

directly unproductive profit seeking dup activities this paper propses directly unproductive profit seeking dup activities as a general concept that embraces a wide range of recently analyzed economic activities including the subset of rent seeking activities considered by krueger it then proceeds to provide a synthesis and generalization of the welfare theoretic analysis of such activities by developing a fourfold categorization of cases depending on the levels of distortions before and after the dup activity thus a unification and overview of the subject are achieved

the solow growth model vector autoregression var and cross section time series analysis the paper examines whether the mankiw et al results regarding the solow model are specific tothe statistical methodology used therefore instead of using cross section data annual data were used and the solow model was investigated using a vector autoregression var analysis for the g7 countries and cross section time series data for the g3 countries analysis shows that in both cases the mankiw et al results generally hold it also shows that the use of annual data can play an important and complementary role in revealing the differences in the growth process between individual countries

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

when arm s length is too far relationship banking over the credit cycle we conduct face to face interviews with bank ceos to classify 397 banks across 21 countries as either relationship or transaction lenders we then use the geographic coordinates of these banks branches and of 14 100 businesses to analyze how the lending techniques of banks in the vicinity of firms are related to credit constraints at two contrasting points of the credit cycle we find that while relationship lending is not associated with credit constraints during a credit boom it alleviates such constraints during a downturn this positive role of relationship lending is stronger for small and opaque firms and in regions with a more severe economic downturn moreover our evidence suggests thatrelationship lending mitigates the impact of a downturn on firm growth and does not constitute evergreening of loans

do competitive environments lead to the rise and spread of unethical behavior parallels from enron while top down descriptors have received much attention in explaining corruption we develop a grassroots model to describe structural factors that may influence the emergence and spread of an individual s un ethical behavior within organizations we begin with a discussion of the economics justification of the benefits of competition a rationale used by firms to adopt structural aides such as the stacking practice that was implemented at enron we discuss and develop an individual level theory of planned behavior then extend it to the dyadic level in an internally competitive organization and finally extend the dyadic model to the social network we apply social network theory to predict favorable and unfavorable conditions for the emergence and diffusion of an intraorganizational instance of unethical behavior and find that network conditions favoring the suppression of the emergence of unethical behavior also promote its diffusion for illustrative purposes we utilize examples from enron s internally competitive structure to embed our arguments in a real world context and bring reality to our theorizing implications for both researchers and managers are discussed

corruption product complexity and african exporters abstractseveral studies have shown that african manufacturers perform poorly especially in comparison to their counterparts from other developing countries we build on these studies by a examining the decision to stop exporting among african manufacturers and b investigating whether these decisions can be linked to institutional dimensions such as corruption consistent with previous studies we observe that a significant fraction of african firms stop exporting every year using product complexity as a measure of an industry s sensitivity to corruption we find that firms in more corruption sensitive industries are more likely to stop exporting if there is an increase in overall corruption in the exporting country firm characteristics such as size and productivity also seem to influence the decision to stop exporting our finding about the relationship between corruption and the decision to stop exporting supports the conventional wisdom that corruption is detrimental to economic performance

the dynamics of corruption with the ratchet effect this paper provides a simple model of corruption dynamics with the ratchet effect as in shleifer and vishny 1993 we consider the sale of government property entry permit by government officials as the prototype of corruption activities in a dynamic version of the shleifer vishny model corrupt officials have ex post the incentive to price discriminate entrepreneurs based on the entry decisions made in an earlier period we show that the inability of government officials to commit to future money demands induces the ratchet effect in that entrepreneurs have incentives to delay entry in order to receive a discount in the permit price later the ex post opportunism erodes the official s extortion power and reduces his revenues from selling permits even though the dynamic setting leaves the corrupt official with less extortion power we cannot rule out the possibility that the official s ability to apply dynamic discrimination decreases the intertemporal aggregate social welfare we also explore the effect of the official s tenure stability on the extent of corruption this allows us to identify circumstances under which the often observed practice of job rotation can help mitigate corruption

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

corruption competition and democracy abstract this paper presents a model of the interaction between corrupt government officials and industrial firms to show that corruption is antithetical to competition it is hypothesized that a government agent that controls access to a formal market has a self interest in demanding a bribe payment that serves to limit the number of firms this corrupt official will also be subject to a detection technology that is a function of the amount of the bribe payment and the number of firms that pay it under quite normal assumptions about the shape of the graph of the detection function multiple equilibria can arise where one equilibrium is characterized by high corruption and low competition and another is characterized by low corruption and high competition some suggestive empirical evidence is presented that supports the main hypothesis that competition and corruption are negatively related

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

rent seeking market structure and growth we study the role of productive and unproductive entrepreneurship in economic growth in a setting where firms compete in both economic and political markets specifically firms compete for market share through cost reducing technological innovation and they vie for influence over government transfer policy through rent seeking activities we find that rent seeking affects growth in two ways it allows firms to ignore economic competition leading to less innovation and it alters the number of firms that are supported in equilibrium the former effect is negative while the latter is ambiguous we show how these effects depend on various characteristics of economic and political markets

starting point bias in dichotomous choice valuation with follow up questioning abstract follow up questions are frequently used to improve the efficiency of dichotomous choice contingent valuation questionnaires however a number of authors e g 12 16 have noted a significant difference between the wtp distributions implied by initial and follow up question responses this paper investigates starting point bias as one explanation for the phenomenon we develop a model of starting point bias in the context of dichotomous choice questioning with follow up using a monte carlo simulation to illustrate the potential bias imparted to wtp estimates an application is provided based on data from a cv study in northcentral iowa

fiscal consequences of public corruption empirical evidence from state bond ratings empirical analyses of public corruption focus predominantly on international differences regional differences in public corruption within a single country receive little attention we empirically investigate the effect of public corruption in the united states on state bond ratings which previous research shows are inversely related to net interest costs on public debt after controlling for various economic influences on bond ratings we find that more corrupt states have lower bond ratings which implies that taxpayers in more corrupt states face a negative pecuniary externality by paying a premium for debt

jointly determined saving and fertility behaviour theory and estimates for germany italy uk and usa abstract the comparative statics predictions of models of the joint determination of household saving and fertility are derived under various hypotheses self interest altruism of parents towards children altruism of children towards parents etc and compared with those of models which determine saving under the assumption of exogenous fertility country specific saving and fertility equations are then estimated using time series data for germany italy uk and usa for each of the countries considered the estimates are consistent with the hypothesis that saving and fertility are jointly determined by self interested parents and reject the alternative hypotheses the data also show that a self financing expansion of social security discourages fertility and generally raises household saving

corruption and product market competition an empirical investigation abstract we analyze the relationship between product market competition and corruption the existing literature typically views corruption as extortion of pre existing rents this perspective suggests that competition usually reduces corruption although generally the sign of this relationship is ambiguous shleifer and vishny 1993 however show that cost reducing corruption is promoted by product market competition that is the effect of competition on corruption depends of the nature of corruption unlike the existing empirical studies that employ cross country data and general measures of corruption we test the competition corruption relationship using firm level information our approach overcomes significant estimation difficulties that result from relying on cross country data for instance we include country fixed effects and we deal with potential endogeneities by instrumenting competition with us capital labor ratios for the appropriate industries contrary to the existing empirical work we show that stronger product market competition is associated mostly with greater corruption of the cost reducing variety

do lenders favor politically connected firms rent provision in an emerging financial market corruption by the politically connected is often blamed for economic ills particularly in less developed economies using a loan level data set of more than 90 000 rms that represents the universe of corporate lending in pakistan between 1996 and 2002 we investigate rents to politically connected rms in banking classifying a rm as political if its director participates in an election we examine the extent nature and economic costs of political rent provision we nd that political rms borrow 45 percent more and have 50 percent higher default rates such preferential treatment occurs exclusively in government banks private banks provide no

corruption and competition in procurement abstract we consider a procurement problem in which the procurement agent is supposed to allocate the realization of a project according to a competitive mechanism that values bids in terms of the proposed price and quality potential bidders have private information about their production costs since the procurement agent is also in charge of verifying delivered quality in exchange for a bribe he can allow an arbitrary firm to be awarded the realization of the project and to produce a quality level lower than that announced we compute equilibrium corruption and we study the impact on corruption of the competitiveness of the environment and in particular of i an increase in the number of potential suppliers of the good or service to be procured and ii an increase of competition in the market for procurement agents we identify the effects that influence equilibrium corruption and show that contrary to conventional wisdom corruption may well be increasing in competition

does foreign aid corrupt abstract we estimate the impact of foreign aid on corruption using geographical and cultural distance to the donor countries as instrumental variables to assess causality aid decreases corruption our results are statistically and economically significant and robust to different controls

health spending savings and fertility in a lifecycle dynastic model with longevity externalities we investigate health spending savings fertility and policy implications in a lifecycle dynastic model with longevity externalities in annuity returns we show that such externalities engender not only excessive health spending but also under saving and excessive fertility social security and health subsidization increase health spending and savings but reduce fertility from laissez faire levels a publicly funded universal health system under labour income taxation raises fertility taxing health spending or using social security and public health together can obtain socially optimal health spending savings longevity and fertility numerical results based on us observations suggest substantial variations among these cases especially in old age health spending

corruption and microenterprises in russia abstract in russia compliance with the rules and regulations that govern almost all aspects of economic life has created a hostile environment for microenterprises more serious than the regulations per se however is the potential niche they create for opportunistic behavior by regulatory authorities in russia the regulatory state has created a corrupt cadre of government bureaucrats who frequently engage in rent seeking behavior while enforcing regulations firms are not uniformly affected by corruption however this paper shows empirical evidence of differential incidence of extortion based on firm and entrepreneurial characteristics corruption in russia is similar to a regressive tax and acts as a disincentive to innovation and growth it may induce technologically inefficient production decisions and can dilute economies of scale and scope

pensions and fertility incentives this paper discusses the welfare implications of a pay as you go pension reform by introducing a child benefit in an endogenous fertility setting in the model of a small open economy higher fertility is associated with a reduction of lifetime labour supply the optimum share of fertility related pensions is always below unity but generally positive the former is true since individuals do not take into account the impact of their labour supply choice on the parent generation it is demonstrated that child allowances are equivalent to fertility related pensions as instruments to achieve the optimum allocation

corruption and socially optimal entry abstract the paper investigates the effects of corruption in the entry certifying process on market structure and social welfare for a cournot industry with linear demand and costs to gain entry a firm must pay a bribe maximizing official a fixed percentage of anticipated profit in addition to the usual set up cost this would lead to a monopoly but only in markets without pre existing or shadow economy firms a benevolent social planner may preempt the harmful effects of corruption by either manipulating the number of pre existing firms in the market or by setting up two independent corrupt licensing authorities a socially optimal number of firms in the market may be reached by choosing the right number of pre existing firms or by having exactly two licensing authorities these mechanisms may be seen as restoring second best efficiency in settings characterized by two major sources of distortion imperfect competition and corruption we also show in an extension that the basic insights carry over in a qualitative sense to a model with quadratic costs and first best entry regulation

contingent valuation of community forestry programs in ethiopia controlling for preference anomalies in double bounded cvm this study examines the welfare effects of community plantations in ethiopia via contingent valuation both single bounded and double bounded survey methods were considered and with respect to double bounded methods the potential for anomalous response behaviour was also taken into account the results generally confirm that there are statistically significant welfare benefits to be derived from community forestry however the range of the estimated benefits is large after controlling for anomalous response behaviour the range of estimated benefits narrows and our preferred estimates place the welfare gain between ethiopian birr etb 20 14 and 30 41 per household which is much lower than the estimated benefits without controlling for anomalous preference responses

bequest values for marine resources how important for indigenous communities in less developed economies communities owning and living on ancestral land tend to have a strong sense of stewardship over the land and its resources which may translate into an economic value to present generations of being able to pass on ancestral lands to future generations i e bequest value this study estimates bequest values to local users of a traditional fishing ground on the coral coast of fiji using a contingent valuation approach using monetary as well as time based contributions bequest values are estimated at between fj 1 25 1 41 us 0 64 0 73 per individual per week or fj 183 90 us 106 91 per household per year this represents a significant proportion of stated average household expenditure comparable to spending on durable household goods and clothes and footwear these results suggest that low income groups may have significant bequest values which should be accounted for in developing economy valuation studies

discrete choice under preference uncertainty an improved structural model for contingent valuation abstract this paper is concerned with discrete choice contingent value estimation in the presence of response errors we attempt to extend the theoretical frameworks developed by hanemann 1984 amer j agric econom 66 332 341 and cameron 1988 j environ econom management 15 355 379 by introducing preference uncertainty with individual respondents we assume that respondents have incomplete knowledge about their true valuation of a nonmarket resource and thus may give wrong yes no answers on whether or not to pay a given bid amount for the resource a post decisional confidence measure for each observed yes no answer is elicited for characterizing the degree of preference uncertainty with the help of this confidence measure we develop an improved structural model for deriving value estimates data from a forest environment valuation survey are used for the empirical estimations

the economics of repeated extortion we provide a simple model of repeated extortion in particular we ask whether corrupt government officials opportunism to demand more once entrepreneurs have made sunk investments entails further distortion in resource allocations if the choice of technology is left to the entrepreneurs the dynamic path of demand schedules will induce entrepreneurs to pursue a fly by night strategy by adopting a technology with an inefficiently low sunk cost component the unique equilibrium is characterized by a mixed strategy of the government official in future demand our model thus explains why arbitrariness is such a central feature of extortion we also investigate implications of the stability of corrupt regimes for dynamic extortion and discuss alternative applications for our framework

efficient estimation methods for closed ended contingent valuation surveys closed ended contingent valuation surveys can be very useful in the evaluation of nonmarket resources respondents merely state whether they would accept or reject a hypothetical threshold amount either as payment for giving up access to the resource or as a fee for its use the authors develop a maximum likelihood procedure which exploits the variation in the threshold values to allow direct and separate point estimates of regression like slope coefficients and error standard deviations without truncation bias their illustration uses data from a survey of recreational fisherman to examine factors which influence individuals willingness to pay copyright 1987 by mit press

public pensions as optimal social contracts abstract a simple overlapping generations model is modified to allow for an externality experienced by the young from consumption by the elderly this sets up a game between generations in which one generation s strategy may be to save too little and rely on gifts from the young e g public assistance for retirement income social security can therefore be viewed as a pareto optimal contract to restore efficient intertemporal allocation a funded public pension plan corresponds to forced saving but is vulnerable in that the next young generation may stop contributing rely on its children for retirement assistance and meanwhile reap the consumption externality from the current elderly s social security benefits this suggests a forced giving or pay as you go type of compulsory pension plan such as exists in most nations which also has the advantage of aiding the initial old generation and therefore generating an immediate consumption externality for the initial young the approach can also be used to explain other aspects of existing social security

the pay as you go pension system as fertility insurance and an enforcement device a paygo system may serve as insurance against not having children and as an enforcement device for ungrateful children who are unwilling to pay their parents a pension in fact the latter was bismarck s historic motive for introducing this system it is true that the paygo system reduces the investment in human capital but if it is run on a sufficiently small scale it may nevertheless bring about a welfare improvement if on the other hand the scale of the system is so large that parents bequeath some of their pensions to their children it is overdrawn and creates unnecessarily strong disincentives for human capital investment

pay as you go public pensions with endogenous fertility abstract veall s 1986 model of public pensions is generalized to allow for endogenous fertility we show that gifts to the old which can be viewed as social security contributions are always positive in the steady state an optimal stationary allocation is sustainable if savings are zero and fertility is exogenous however the optimal allocation is in general not sustainable in particular if a government enforces a social security plan setting the pension level at the optimal gifts and individuals optimize under the pension constraint the resulting sustainable outcome is in general different from either the optimal or nash outcome

organizational isomorphism and corruption an empirical research in russia based on neo institutional literature this article aims to show the influence of organizational isomorphism on corruption the focus is institutional explanations of corruption our model is based on empirical research in russia at the end of the 1990s a face to face questionnaire was conducted with 552 top executives in private firms across various economic sectors we used the structural equation model partial least squares pls technique to test our hypotheses the developed model provides an integrated approach to the study of the relationship between corruption and organizational isomorphism our empirical data from firms in russia allowed us to test various theoretical hypotheses concerning the influence of organizational isomorphism on corruption our emphasis is on the influence of competitive and institutional isomorphism on corruption

decentralized bribery and market participation i propose a bribery model that examines decentralized bureaucratic decision making there are multiple stable equilibria high levels of bribery reduce an economy s productivity because corruption suppresses small business and reduces the total graft even though the size of an individual bribe might increase decentralization prevents movement towards a pareto dominant equilibrium anticorruption efforts even temporary ones might be useful to improve participation if they lower the bribe levels demanded and thus encourage small businesses to participate

corruption tax evasion and the laffer curve in a corrupt tax administration a rise in tax ratesets off complicated strategic moves by both taxpayersand administrators it is shown that in somecircumstances this may bring about laffer likebehavior of overall tax revenue i e a higher taxrate results in smaller net revenue for thegovernment further a more intense tax effort byincreasing the number of returns audited may alsoreduce net revenues finally if tax and fine ratespositively influence the level of corruption in theadministration these outcomes become more likely

the king can do no wrong on the criminal immunity of leaders abstract in its recent anti corruption campaign china removed the criminal immunity originally enjoyed by its leaders absent fundamental changes in the political institution in which incumbent leaders instead of citizens at large select the next leaders such a partial reform pays off only if i it takes place at the right time ii it goes easy on corrupt low rank officials and iii the government is reasonably centralized failing any of these such a partial reform would lead to rampant corruption throughout the government hierarchy an outcome far worse than retaining leader immunity

evaluating the validity of the dichotomous choice question format in contingent valuation hypothetical and actual cash willingness to pay wtp for an art print were elicited with dichotomous choice and open ended question formats comparing hypothetical and actual dichotomous choice responses using both a likelihood ratio test and the method of convolutions suggests we reject equality at the 0 05 but not the 0 01 level hypothetical wtp was roughly two times actual wtp with the dichotomous choice format there were no significant differences between the open ended and dichotomous choice question formats when both were used to estimate hypothetical wtp or both used to estimate actual wtp

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

economic value of cedar relics in lebanon an application of contingent valuation method for conservation abstract the cedar forests in lebanon give shelter to a rich biodiversity and they constitute important mountainous relic habitats harboring a wide range of endemic rare and threatened species and species with economic potential these forests once covering the eastern and western mountain chains have been the providers of quality timber for the region in historical times the ancient practices have left the country with only 12 forest relics distributed on the mount lebanon chain even though recognized worldwide as flagship species and sites of cultural religious and historical values these forests have attracted limited international funds for their conservation these funds proved not to be sustainable for long term conservation plans therefore a system for securing local funds for the protection of cedar forest is needed in this context this research study was designed having three main objectives which are firstly to illustrate the differences in the value of cedar forests between citizens and villagers users and non users secondly to identify the best ways to collect local funds and design other tools involving for example public participation needed in setting out a sound strategy for the conservation of the cedar forests thirdly to use the findings of this study as a tool to investigate in further studies and to inform and influence decision makers about the importance of a long term conservation and sustainable use program as well as to consider a strategic approach for its sustainable use using an open ended questionnaire contingent valuation method is applied to highlight the importance of well informed population to obtain the willingness to pay wtp for a scenario to conserve cedar forests in lebanon to increase their surface areas to promote sustainable activities and to explore the degree of importance of their attributes and of the option bequest and existence values as perceived by the lebanese population the wtp is tested by using a regression model relating wtp to all socio demographic variables the questionnaires 416 were performed in three main cities in lebanon and in villages surrounding two nature reserves the difference in the individual wtp value for users and non users was approximately us 20 per household for both villagers and city dwellers the frequency of the zero wtp value was higher for non users the results obtained encouraged a national initiative to create a national trust fund and to integrate symbolic fees on the amenity services associated with cedar forests

valuing public goods discrete versus continuous contingent valuation responses independent applications of open ended and dichotomous choice formats are compared using tests of means estimating joint likelihood functions and nonparametric tests of distributions the null hypothesis of no difference in the open ended and dichotomous choice estimates of central tendency cannot be rejected for two out of three data sets while estimated standard deviations are significantly different for all three data sets in addition actual dichotomous choice means and standard deviations exceed those from comparable synthetic dichotomous choice data sets suggesting either open ended questions underestimate values or dichotomous choice bid structures may lead to systematic overestimates

comparing continuous and discrete contingent valuation questions this paper explores two commonly used methods to elicit an individual s willingness to pay wtp for a public good in contingent valuation studies currently the most preferred method is the take it or leave valuation question or discrete valuation question dvq where the respondent accepts or rejects a suggested cost for the good the traditional method the continuous valuation question cvq simply asks an individual to state his wtp for the suggested change in the provision of a public good like cleaner air we introduce a simple way to compare the results from these two methods we also test the anchoring behavior suggested in the psychological literature on choice under uncertainty the results do not support the anchoring hypothesis but suggest the hypothesis that people perceive the two tested valuation questions differently

information bias in contingent valuation effects of personal relevance quality of information and motivational orientation abstract a laboratory experiment examined the potential for information bias in contingent valuation cv consistent with the view that information about a public or private good can function as a persuasive communication willingness to pay wtp was found to increase with the quality of arguments used to describe the good especially under conditions of high personal relevance under low personal relevance wtp for a public but not for a private good was higher when an altruistic as opposed to an individualistic orientation was activated it is concluded that the nature of the information provided in cv surveys can profoundly affect wtp estimates and that subtle contextual cues can seriously bias these estimates under conditions of low personal relevance

corruption in bank lending to firms cross country micro evidence on the beneficial role of competition and information sharing abstract building on the important study by beck demirguc kunt and levine 2006 bank supervision and corruption in lending journal of monetary economics 53 2131 2163 we examine the effects of both borrower and lender competition as well as information sharing via credit bureaus registries on corruption in bank lending using the unique world bank data set wbes covering more than 4 000 firms across 56 countries with information on credit bureaus registries assembled by djankov mcliesh and shleifer 2007 private credit in 129 countries journal of financial economics 84 299 329 and bank regulation data collected by barth caprio and levine 2006 rethinking bank regulation till angels govern cambridge university press new york to measure bank competition and information sharing we find strong evidence that both banking competition and information sharing reduce lending corruption and that information sharing also helps enhance the positive effect of competition in curtailing lending corruption we also find that the ownership structure of firms and banks legal environment and firm competition all exert significant impacts on lending corruption

public pensions with endogenous fertility comment on nishimura and zhang abstract the analysis in nishimura and zhang journal of public economics 1992 48 239 258 n z relies on an unstated assumption that either individuals are able to coordinate their fertility decisions or individual pensions are conditional on individual fertility the present note criticizes this assumption and shows what happens if it is dropped introducing a social security system with a rate of tax equal to the socially optimal transfer from the young to the old will have no effect on fertility but will raise lifetime consumption and welfare rather than reduce fertility and raise transfers as n z predict the implications of reversing the direction of altruism from parents to children rather than children to parents as in n z or doing away with altruism altogether are also discussed

transfers to families with children as a principal agent problem abstract the relationship between government and parents is modelled as a principal agent problem with the former in the role of principal and the latter in that of agents we make four major points the first is that if the well being of the child depends not only on luck but also on parental actions that the government cannot readily observe the latter can influence parental behaviour by conditioning income transfers to families on child performance the second point is that if there are market inputs into the making of a happy or successful child which the government can observe but not ascribe to any particular parent or child because they are bought anonymously an income transfer policy can be usefully complemented by an indirect subsidy on the price of these inputs the third is that if parents care about their children incentive considerations may have to be tempered by the need to compensate those who have the misfortune of getting a child with low ability the fourth is that parents can be induced to have the socially desirable number of children by making the transfer conditional not only on child performance but also on number of children ways of making these findings operational and the effects of administrative costs are discussed in some detail