donors have in many countries (including Uganda) supported the establishment of institutions to deal specifically with issues of corruption. However, little is known about the extent to which such institutions have been effective or the extent to which increased levels of accountability would help improve their effectiveness, as would be suggested by a number of recent studies that have pointed to an important role of the mass media to put policy making on a more informed basis (Stromberg 2001, Besley and Burgess 2002) and demands to bring in new actors such as NGOs and to foster transparency and open debate as a means to expose corrupt practices (Merhotra 2002, Goetz and Jenkins 2002, Ebrahim 2003).

Uganda provides an interesting case to study this issue. Despite high levels of economic growth since the early 1990s, the country has ranked continuously in the bottom part of Transparency International’s corruption perception index.<sup>1</sup> Low levels of transparency and accountability have been identified as potential obstacles to continued progress in reducing poverty (Francis and James 2003). The goal of reducing corruption features prominently in the country’s development strategy and an Inspector General of Government (IGG) and a Ministry of Ethics and Integrity have been set up to help put this into practice. In addition, the Leadership Code Act of 2002 provides for minimum standards of behavior and conduct by leaders serving in public offices (including government departments and statutory bodies) and for an enforcement mechanism through the IGG’s office. It requires leaders to declare there incomes, assets and liabilities at the time of assumption of office and thereafter every two years (Republic of Uganda, 2002a). Thus the country provides a good example to derive lessons on the incidence of corruption, the potential importance of good governance for service delivery, and the effectiveness of mechanisms to improve governance and accountability.

# **2.2 Conceptual model**

Assume that a public administrator receives exogenously given transfers (e.g. from central government) of size _Mp_ to provide public goods and at the same time has to approve private investments of size _Mq_ . The monetary benefit to the administrator from investing _x_ in public goods or from an investment of _x_ by the private sector is given by the functions _bp(x)_ for public and _bq(x)_ for private investment, respectively. We assume that these functions are well-behaved (i.e. _b’(x) > 0_ , _b’’(x) < 0_ and _b(x)<x_ for any _x_ ).<sup>2</sup> In each case, the administrator has the possibility of diverting a share _li < 1_ ( _i=p, q_ ) of the money involved to own use. This money can be kept if the looting is not detected but an amount _di(lix_ ) with _d’(x) > 0, d’’(x)> 0_ and _d(x)>x_ has to be repaid if diversion of _x_ is detected. The probability of being detected is _p(a,I)_ which has as its functions the level of accountability _a_ and the institutional framework _I_ and which is concave in both its arguments. The problem of the administrator is then to choose _l_ i _(i=p,q)_ to maximize

> 1 While the expansion in the number of countries in the corruption perception index compiled by Transparency International makes a consistent assessment more difficult, Uganda ranked as 43<sup>rd</sup> out of 51 countries in 1996 (the first year when the country was included), 74<sup>th</sup> of 85 in 1998, 80<sup>th</sup> out of 90 in 2000, and 113<sup>th</sup> out of 133 in 2003.

> 2 The latter just implies that the monetary benefit will not be greater than the amount invested.

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