The rest of the paper is organized as follows; in section II, we discuss the theoretical framework of the dynamic relationship between corruption and youth unemployment. Section III outlines the key hypothesis of this research. The results of our empirical analysis are discussed in section IV. The concluding remarks are given in section V.

# **II-    The vicious circle**

Several authors have provided multiple definitions of corruption which evolved around the main and straightforward definition that, “it is the abuse of public power for personal gains.”<sup>1</sup> While corruption exists also in the private sector, particularly when decision-makers’ interests are at odds with those of shareholders, for the purpose of the present study, we assume only bribes received by government officials,<sup>2</sup> assuming that only the public sector creates employment opportunities in the economy.

We consider a simple framework with two actors; a government official (the agent) providing job opportunities and a job seeker whose utility function can only be maximized when he gets selected for a government position. In this model, we assume that the supply of job opportunities is limited to the public sector. Because of limited supply, rationing the human capital available (potential labor force) by filtering their applications to select the appropriate candidate becomes unavoidable (Tanzi, 1998). The government official maintains the right to apportion the limited supply and to offer the opportunity of work to a given job seeker without being accountable for this decision. In other words, while the process for job advertisement might be totally transparent allowing for free and competitive submission of applications for any government opening, the final decision to select a candidate is left to the official’s discretion. We assume that in the absence of strict regulation enforcing the agent’s accountability, the latter has higher incentive to grant the job to the applicant willing to pay the highest bribe. This hypothesis is supported by Ades and Di Tella’s (1997) empirical evidence which showed that corruption is higher in countries with weak or non-independent judicial institutions that negatively affect the personal and the moral costs of demanding bribes for the rent-seeking officials (Svensson, 2003). A corrupt government official will try to maximize his utility function by maximizing the amount of bribes received from the job seekers who are willing to pay (Van Rijckeghem and Weder, 1997). Thus, the question one should thus ask is, given the assumed official’s incentive

> 1 Tanzi (1998: 8) argues that “the abuse of public authority is not necessarily for personal gains but could also be accepted for the benefit of one’s party, class, tribe, friends and family”.

2 In certain circumstances, bribes are assimilated to gifts which in certain societies or local cultures remain a common practice to express one’s gratitude. As numerous authors who studied this distinction (Tanzi, 1998; Shleifer and Vishny, 1993; Azfar et al., 2001) have argued, because very often the thin line separating the identification of the two aspects remains very difficult to make, local regulations have in most countries strictly prohibited both practices so as not to induce confusion.

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