reducing bureaucratic corruption interdisciplinary perspectives on what works abstract this article offers the first comprehensive review of the interdisciplinary state of knowledge regarding anti corruption policies with a particular focus on reducing corruption among civil servants drawing on the work of economists political scientists sociologists and anthropologists we examine seven policy categories 1 rewards and penalties 2 monitoring 3 restructuring bureaucracies 4 screening and recruiting 5 anti corruption agencies 6 educational campaigns and 7 international agreements notably rigorous empirical evaluation is lacking for the majority of commonly prescribed anti corruption policies nevertheless we find growing evidence of the effectiveness of policies based on monitoring including anti corruption audits and e governance in addition adequate civil service wages seem to be a necessary but insufficient condition for control of corruption an emerging skepticism regarding the effectiveness of anti corruption agencies also is apparent in the literature we conclude with broader lessons drawn from our review such as the recognition that when corruption is a systemic problem it cannot be treated in the long term with individual level solutions

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

international emissions trading under the kyoto protocol credit trading abstract the kyoto protocol allows emissions trading between countries the protocol does however not specify how such trade is to take place so far two options have been discussed in the literature government trading and permit trading this paper discusses a third option credit trading credit trading is based on abatement projects but differs from joint implementation in that it does not require direct foreign investment furthermore credit trading can be implemented both domestically and internationally the main advantages of credit trading are that it excludes trading in hot air while it still makes trade between private entities possible however the environmental effectiveness is doubtful especially when it is based on relative targets the paper shows that several interest groups prefer credit trading based on relative targets to permit trading also governments may have reasons to prefer credit trading to permit trading hence the political acceptability of credit trading is larger than that of permit trading making it more likely that credit trading will be allowed than permit trading

why did the elites extend the suffrage democracy and the scope of government with an application to britain s age of reform a new rationale is presented for why an elite may want to expand the franchise even in the absence of threats to the established order expanding the franchise can turn politicians away from particularistic politics based on ad personam redistribution within the elite and foster competition based on programs with diffuse benefits if these programs are valuable a majority of the elite votes in favor of an extension of the franchise despite the absence of a threat from the disenfranchised we argue that the evolution of public spending and of political competition in nineteenth century britain is consistent with our model i introduction at the beginning of the nineteenth century in most countries narrow elites had a disproportionate influence on public affairs even in england where parliament was an influential institution suffrage was mostly the privilege of the wealthy and some members of parliament were elected in boroughs with as few as 100 voters while cities such as manchester did not have any representative a century later most western countries had universal male suffrage with female suffrage to arrive shortly thereafter what brought about this democratic revolution in many cases the elites were forced out of power after violent revolutions however there are important examples such as england where democratization took the form of gradual extensions of the suffrage and these were accompanied by little overt violence it is the peculiar pride of england that the record of social and political reform is to be found on the statute book not in the annals of revolution cheyney 1931 p vii such peaceful democratizations are difficult to rationalize within the benchmark political economic models in those models extending the franchise dilutes the elite s power to influence policy and results

frictions in project based supply of permits emissions trading in climate change can entail large overall cost savings and transfers between developed and developing countries however the search for acceptable ji or cdm projects implies a deviation from the perfect market framework used in previous estimations our model combines the search market for projects with a frictionless permit market to quantify the supply side frictions in the co2 market we also decompose the effects of frictions into the effects of search friction bargaining and bilateralism a calibration using previous cost estimates of co2 reductions illustrate changes in cost savings and allocative implications

search bargaining money and prices the goal of this paper is to extend existing search theoretic models of fiat money which until now have assumed that the price level is exogenous by explicitly incorporating bilateral bargaining this allows us to determine the price level endogenously and leads to additional insights concerning the role of money for example we find that monetary equilibria are generally inefficient in the sense that output and prices differ from the solution to a social planner s problem although the difference can become small as the discount rate or search friction vanishes we also find that there exist nonstationary inflationary equilibria

the origins of state capacity property rights taxation and politics economists generally assume that the state has sufficient institutional capacity to support markets and levy taxes this paper develops a framework where policy choices in market regulation and taxation are constrained by past investments in legal and fiscal capacity it studies the economic and political determinants of such investments demonstrating that legal and fiscal capacity are typically complements the results show that among other things common interest public goods such as fighting external wars as well as political stability and inclusive political institutions are conducive to building state capacity some correlations in cross country data are consistent with the theory

carbon trading thickness and market efficiency abstract this note tests for the efficient market hypothesis emh in the market for co 2 emission allowances in phase i and phase ii of the european union emissions trading scheme eu ets as usually is the case in emerging and non competitive markets such as the eu ets trading often not occurs on a frequent basis this has adverse implications for both the gains from permit trade as well as biases the emh tests variance ratio tests are employed to adjust for the thin trading effect the results indicate that phase i the trial and learning period was inefficient whereas the first period under phase ii shows signs of restoring market efficiency

political decentralization and corruption evidence from around the world abstract how does political decentralization affect the frequency and costliness of bribe extraction by corrupt officials previous empirical studies using subjective indexes of perceived corruption and mostly fiscal indicators of decentralization have suggested conflicting conclusions in search of more precise findings we combine and explore two new data sources an original cross national data set on particular types of decentralization and the results of a firm level survey conducted in 80 countries about firms concrete experiences with bribery in countries with a larger number of government or administrative tiers and given local revenues a larger number of local public employees reported bribery was more frequent when local or central governments received a larger share of gdp in revenue bribery was less frequent overall the results suggest the danger of uncoordinated rent seeking as government structures become more complex

endogenous changes in the exchange rate regime a bureaucratic incentive model public choice submits that legal changes can be endogenous in such a way that they are manipulated by bureaucrats who want to maximize rents from transactions with various interest groups this paper takes the change in exchange rate regimes to empirically examine the premise it offers a two stage method in which we first show that the exchange rate is influenced by interest group pressures and subsequently that the 1990 market average regime mar as a phase in policy in korea was introduced mainly to serve bureaucratic incentives this method is expected to be useful to a host of countries for various studies attempting to test a possible existence of bureaucratic or other hidden motivations behind any isolated event of policy change

the effect of allowance allocations on cap and trade system performance abstractan implication of the coase theorem is that under certain conditions the market equilibrium in a cap and trade system will be cost effective and independent of the initial allocation of tradable rights that is the overall cost of achieving a given aggregate emission reduction will be minimized and the final allocation of permits will be independent of the initial allocation we call this the independence property this property is important because it means that the government can establish the overall pollution reduction goal for a cap and trade system by setting the cap and leaving it up to the legislature to construct a constituency in support of the program by allocating the allowances to various interests without affecting either the environmental performance of the system or its aggregate social costs we examine the conditions under which the independence property is likely to hold both in theory and in practice

stability of equilibria with externalities it is shown that in a class of models with multiple externalities one positive and one negative all stationary equilibria may be locally stable to perturbations in the sense that there exist perfect foresight trajectories leading back to the equilibrium thus scale diseconomies arising for example out of a common resource pool generally overturn the liviatan samuelson result that equilibria are either saddlepoints or sources

costly search and recruiting a labor market model with costly search and recruiting is constructed it incorporates many features found in other models and provides new insights into the effects of externalities and transaction costs the model possesses a continuum of equilibria some of which may be pareto ranked with different rates of unemployment despite the multiplicity of equilibria comparative statics results are obtained copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the market for sulfur dioxide emissions the 1990 clean air act amendments initiated the first large scale use of the tradable permit approach to pollution control the theoretical case for this approach rests on the assumption of an efficient market for emission rights the authors empirical analysis shows that the emission rights market created by the 1990 amendments had become reasonably efficient by mid 1994 they also show that the auctions specified in the amendments to jump start trading had become a small part of the overall market finally the authors demonstrate that the strategic bidding behavior discussed in the literature has had no effect on market prices copyright 1998 by american economic association

thin versus thick co2 market abstract the idea that trading is more costly the thinner the market is is common in most studies of market exchange with frictions surprisingly this element is lacking from previous attempts to allow for frictions in pollution permit markets this paper considers a co 2 cap and trade model where trading costs develop endogenously as a function of the market size the pre trade allocation of permits determines whether the market size can be strongly influenced by expectations that have a role because of adjustment costs the pre trade allocation also sets preconditions for endogenously vanishing trading costs and thus has nonstandard effects on long run trading levels and market allocations

transaction costs and tradeable permits abstract tradeable permit systems are at the center of current interest and activity in market based reforms of environmental policy because these systems can offer significant advantages over conventional approaches to pollution control unfortunately claims made for their relative cost effectiveness have often been exaggerated transaction costs which may be significant in these markets reduce trading levels and increase abatement costs in some cases equilibrium permit allocations and hence aggregate control costs are sensitive to initial permit distributions providing an efficiency justification for politicians typical focus on initial allocations

electoral rules and corruption is corruption systematically related to electoral rules recent theoretical work suggests a positive answer but little is known about the data we try to address this lacuna by relating corruption to different features of the electoral system in a sample of about eighty democracies in the 1990s we exploit the cross country variation in the data as well as the time variation arising from recent episodes of electoral reform the evidence is consistent with the theoretical priors larger voting districts and thus lower barriers to entry are associated with less corruption whereas larger shares of candidates elected from party lists and thus less individual accountability are associated with more corruption individual accountability appears to be most strongly tied to personal ballots in plurality rule elections even though open party lists also seem to have some effect because different aspects roughly offset each other a switch from strictly proportional to strictly majoritarian elections only has a small negative effect on corruption jel e62 h3

fairness in a tradeable permit treaty for carbon emissions reductions in europe and the former soviet union this paper evaluates the distributional implications of alternative permit allocations in a tradeable permit regime for carbon emissions reductions 20 below baseline in 2010 for a region consisting of europe and the states of the former soviet union fsu participation in such a regime is expected to hinge on the fairness of the distributional consequences we find that initial permit allocations by populationand or gdp are unlikely to induce participation by most countries of eastern europe and fsu because of the net costs involved we identify a set of initial allocations that would at least compensate these countries a fair treatment of the countries in western europe we is here one which equalizes net costs pergdp for a wide set of cost functions for carbon emission reductions the cost gains that we would reap from a tradeable permit system relative to unilateral reductions by we as a group are found to be on the order of 85 percent this would imply among other things a significant increase in we scapacity to make further emissions reductions

abatement and permits when pollution is uncertain and violations are fined this paper considers a firm s choice of abatement and of the number of permits if actual pollution is stochastic such that full compliance cannot be ensured this straightforward extension induces non trivial and unexpected comparative static properties such as permits and abatement can be either substitutes or complements higher fines can lower the number of acquired permits or abatement and higher permit prices can reduce abatement yet integrating these reactions into a competitive permit market eliminates puzzling features this is an additional justification of tradable permits over standards where regulators must cope with potentially counterproductive firm reactions

the optimal size of a permit market regulating the emissions of non uniformly mixed pollutants with a permit market carries the risk of hot spot formation which can be reduced by dividing the regulation area into trading zones the trading zone approach has been extensively discussed for the full information case we consider incomplete information concerning the emitters abatement costs their locations and pollution dispersion we derive the optimal number of trading zones and the optimal number of permits per zone and analyze under which conditions a system of independent trading zones is superior to other policy measures our results show that appropriately sized permit markets are well suited to regulating non uniformly mixed pollutants under informational constraints if firms are not too heterogeneous only for substantial heterogeneity and a highly non linear damage function can it be optimal to use command and control strategies

bringing biophysical models into the economic laboratory an experimental analysis of sediment trading in australia abstract experimental economics has emerged and matured as a formal method for questioning and testing economic theory and assumptions concerning individual behavior more recently experimental methods have been used successfully in an economic laboratory to test alternative environmental policy options the data underpinning these experiments is often stylized or hypothetical in nature ecologists and experimental economists have much to gain by exploring ways to underpin economic experiments with data generated from biophysical models the study makes a contribution by demonstrating how underpinning experiments with regionally modeled biophysical data may give insights which would not necessarily arise from stylized data in this study sediment data generated from an environmental management support system emss a software model of sediment runoff in catchments was used to populate the players decision space the study investigated the relative performance of four different instruments closed first and second price call tenders cap and trade and command and control regulation these market instruments will be compared with the aim of promoting riparian management and reducing total suspended solids exiting a catchment the study finds that the cost of meeting regulatory requirement of sediment reduction through command and control is less than either first or second price auction however cap and trade produced high levels of convergence and production which moved towards minimizing the cost of achieving the cap reduction level

rational expectations business cycles in search equilibrium we examine the rational expectations equilibrium paths of the model of search and barter in diamond s aggregate demand management in search equilibrium for some initial positions there are two equilibrium paths converging to different steady states with the high activity path pareto dominating the low activity path with some parameters there is also a continuum of equilibrium paths converging to another steady state moreover there can be cycles that are equilibrium paths even though the environment is stationary

elites and corruption a theory of endogenous reform and a test using british data eighteenth century britain displayed patterns of corruption similar to those of developing countries today reforms enacted in the late eighteenth and early nineteenth centuries eliminated many of these patterns this article develops a theoretical argument that seeks to explain why the british elite enacted anticorruption reforms and provides evidence using a new data set of members of the house of commons the author argues that the shock that pushed the british elite from preferring the old corrupt regime to preferring the reformed one was an increase in government spending and a corresponding increase in the costs of tolerating corruption features unique to britain allowed the reformist outcome to emerge and illuminate why such an outcome is difficult to achieve in general

political economy of the kyoto protocol the kyoto protocol negotiated in december 1997 is the first international treaty to limit emissions of greenhouse gases but kyoto does not mark the conclusion to international cooperation on climate change it is really just a beginning this paper shows that in the aggregate the benefits of undertaking the kyoto reductions should exceed the corresponding costs provided these are achieved cost effectively but although kyoto seeks to promote cost effectiveness it may yet prove very costly moreover the agreement may not even achieve the reductions that it promises either because emissions will relocate to the countries that are not required to stay within kyoto prescribed ceilings or because paper trades will be promoted by the protocol s mechanisms more fundamentally kyoto does not deter non compliance and it only weakly deters non participation these flaws need to be mended but the nature of the problem makes that an especially difficult task copyright 1998 by oxford university press

information the dual economy and development we examine the interactions between different institutional arrangements in a general equilibrium model of a modernizing economy there is a modern sector where productivity is high but information asymmetries are large and a traditional sector where productivity is low but information asymmetries are small consequently agency costs in the modern sector make consumption lending difficult while such lending is readily done in the traditional sector the resulting trade off between credit availability and productivity implies that not everyone will move to the modern sector in fact the laissez faire level of modernization may fail to maximize net social surplus this situation may also hold in the long run in a dynamic version of the model a trickle down effect links the process of modernization with reduction in modern sector agency costs this effect may be too weak and the economy may get stuck in a trap and never fully modernize the two sector structure also yields a natural theoretical testing ground for the kuznets inverted u hypothesis we show that even within the sectoral shifting class of models this phenomenon is not robust to small changes in model specification

designing more efficient markets lessons from los angeles smog control market based approaches for environmental protection are beginning to take root around the world this article attempts to improve our understanding of the performance of environmental markets by constructing and evaluating an information base on trades in los angeles which includes the first detailed data on trading prices the analysis suggests that trading activity has been shaped by the detailed regulations governing the market in addition transaction costs have played a crucial role we argue that the move toward adopting market based approaches for environmental protection needs to be accompanied by a vigorous effort to assess the properties of these systems as they are actually implemented