Growing out of corruption
Jie Bai, Seema Jayachandran, Edmund J. Malesky, Benjamin Olken , 22 November 2013
Eliminating corruption is a central policy goal of policymakers around the globe. It is known that corruption is a barrier to economic development because it increases the costs and risk of business activity, and deters investment. This column discusses a new study analysing the opposite causal relationship – the effect of economic growth on corruption. Both theoretical and empirical evidence show that economic growth causes the amount of corruption to fall.
Eradicating corruption ranks among the central policy concerns of economic development practitioners around the globe. Then-World Bank President James Wolfenson made the case for combatting corruption in a 1996 speech now known as the “Cancer of Corruption” address. In it, he spelled out a theoretical mechanism connecting corruption and poverty:
Topics: Development, Poverty and income inequality
Tags: bribes, Corruption, developing countries, economic growth
Democracy in Africa
Thorvaldur Gylfason, 17 November 2013
Based on statistical measures of different degrees of democracy vs. autocracy, this article briefly reviews the progress of democracy around the world during the past 212 years, and places democratic developments in Africa since 1960 in that context. Democracy is positively associated with education, which in turn is associated with lower fertility and greater longevity. Democracy is also associated with reduced corruption. Together, these effects suggest democracy should be good for growth – a hypothesis that is borne out by the data.
A man’s admiration for absolute government is proportionate to the contempt he feels for those around him.
― Alexis de Tocqueville
Until the second half of the 19th century, there were so few democratic states around the world that they could be counted on the fingers of one hand.
Topics: Development, Economic history, Politics and economics
Tags: Africa, anocracy, autocracy, Corruption, democracy, education, fertility, growth, life expectancy
Higher government wages may reduce corruption
Jakob de Haan, Erik Dietzenbacher, Văn Hà Le, 16 June 2013
Do higher government wages reduce corruption? This column argues that they do, but only in relatively poor countries. When a country’s poor, higher government wages reduce bureaucrats’ incentive to extract illegal incomes. However, as income per capita rises, higher government wages gradually lose their effectiveness in combating corruption.
Defined as the abuse of public office for private gain, corruption is found to have bad effects on economic development, weaken the institutional system and create cynicism in the political life (Rose-Ackerman 2004).
Topics: Politics and economics
Cyprus, corruption, money laundering and Russian round-trip investment
Svetlana Ledyaeva, Päivi Karhunen, John Whalley, 17 June 2013
Russian involvement in Cyprus was widely recognised during the acute phase of the most recent EZ crisis. This column argues that some of this is driven by corruption-linked money laundering. Using official Russian statistics, the authors estimate a standard model of FDI location to identify usual patterns related to nations with lax anti-money laundering measures such as Cyprus and the British Virgin Islands. Funds from such nations were biased towards locating investments in the most corrupt Russian regions compared to a group of genuine foreign investors.
The financial relationship between Cyprus and Russia has received a lot of attention as a result of the recent crisis in Cyprus (Wyplosz 2013). A large amount of Russian money has been invested in this small Mediterranean economy over the last two decades. It has been estimated that about one half to a third of all Cyprus bank deposits are of Russian origin.
Topics: International finance
Tags: Corruption, Cyprus, round-trip investment
Public procurement markets: Where are we?
Patrick A Messerlin, Sébastien Miroudot, 7 September 2012
Public spending on large-scale projects is often a way of sneaking in protectionism through the back door and there are many cases of outright corruption. With the EU and US pushing hard for more open public procurement elsewhere in the world, this column asks just how open these markets are, particularly in the EU, which claims to have the most open market in the world.
Recently, the EU and US have pushed very hard for opening public procurement markets, as illustrated by the EU and US pressures on Japan and China, respectively. In particular, the EU claims that it is by far the most open market in the world.
Topics: EU policies, Global governance, Institutions and economics
Tags: Corruption, EU, OECD, public procurement, US
Green policy and corruption
Massimo Tavoni, Caterina Gennaioli, 12 July 2012
Despite best intentions, government policies can sometimes provide politicians and others with an incentive to break the law. This column analyses the link between state support for renewable energy and corruption. It provides some evidence of this connection for the case of the tradable green certificate system, a policy introduced in Italy in 1999 to promote wind power.
In many countries public support policies have been implemented over the past several years with the aim of promoting renewable energy, energy efficiency, and the transition to a low-carbon economy.
Topics: Environment, Politics and economics
Tags: Corruption, green policy, Italy
Looking beyond the incumbent: The effects of exposing corruption on electoral outcomes
Ana De La O, Alberto Chong, Dean Karlan, Léonard Wantchékon, 23 January 2012
For democratic theorists, the notion that greater transparency improves accountability is axiomatic: when voters find out about political corruption, they punish the offending politicians by not voting for them again. But, the authors of CEPR DP8790 argue, many voters also respond to evidence of corruption by not voting at all – indicating that more transparency might not automatically result in a healthier democratic process.
Vox readers can download CEPR Discussion Paper 8790 for free here.
Journalists are entitled to free DP downloads on request; please contact firstname.lastname@example.org. To learn more about subscribing to CEPR's Discussion Paper Series, please visit the CEPR website.
Topics: Development, Politics and economics
Tags: accountability, Corruption, democracy, elections, Information, transparency
Lifting the curtain on corruption in developing countries
Benjamin Olken , Rohini Pande, 21 January 2012
Recent innovations in methodology have sparked a remarkable expansion in economists’ ability to measure corruption. This column reviews these new techniques, which range from inferring corrupt links from stock prices to attempting to observe bribes undercover. It concludes that, while corruption is prevalent in poor countries, there remains little consensus about its magnitude or the best way to fight it.
In recent years, innovations in methodology have sparked a remarkable expansion in economists’ ability to measure corruption.
Tags: bribes, Corruption, developing countries
Three's company: Wall Street, Capitol Hill, and K Street
Deniz Igan, Prachi Mishra, 11 August 2011
Did anti-regulation lobbying fuel the subprime crisis? This column shows that there is a strong relationship between financial industry lobbying and favourable financial regulation legislation. It argues that the financial industry fought, and defeated, measures that might have curbed some of the reckless lending practices that many think played a pivotal role in igniting the crisis.
At the end of 2007—as markets grappled with early stages of what would become the worst financial crisis in the post-WWII era and a severe recession seized the US economy—the Wall Street Journal reported that two of the largest mortgage lenders in the US spent millions of dollars in political donations, campaign contributions, and lobbying activities from 2002 t
Topics: Global crisis, Politics and economics
Tags: Corruption, financial regulation, global crisis, lobbying, subprime crisis, US
Roads to nowhere or bridges to growth: What do we know about public investment efficiency in developing countries?
Jim Brumby, Era Dabla-Norris, Annette Kyobe, Zac Mills, Chris Papageorgiou, 3 July 2011
In the debate over the pros and cons of government spending, the efficacy of public investment is a point on which many conclusions hinge. This column introduces a new Public Investment Management Index that benchmarks the quality and efficiency of the investment process across 71 developing and emerging countries.
The broad consensus is that the massive infrastructure deficit in many developing countries is a key bottleneck to their growth prospects. In many low-income countries in particular, deficiencies in infrastructure, especially in energy, roads, and communication, reduce productivity at least as much as structural factors, such as bureaucracy, corruption, and lack of financing.
Topics: Development, Institutions and economics, Politics and economics
Tags: Corruption, government spending, public investment