Is corruption bad for economic growth? Evidence from Asia-Pacific countries

This study utilizes the bootstrap panel Granger causality approach, which incorporates both cross-sectional dependence and heterogeneity across countries, to investigate whether corruption negatively impacts economic growth in thirteen Asia-Pacific countries over the 1997–2013 period. The empirical results show that there is a significantly positive causality running from corruption to economic growth in South Korea, a significantly positive causality running from economic growth to corruption in China and no significant causality between corruption and economic growth for the remaining countries. According to the empirical results, we do not support the common perception that corruption is bad for economic growth for all thirteen Asia-Pacific. On the contrary, results of this study suggest that the “grease the wheels” hypothesis is supported for South Korea. Additionally, results of this study indicate that for most Asia-Pacific countries, policy makers’ use of anti-corruption policies to promote a country's economic development may not be effective. Finally, results of this study also suggest that for China, increase in economic growth leads to an increase in corruption.     

Causes of corruption: a survey of cross-country analyses and extended results

We survey and assess the empirical literature on the sources of corruption Thanks to the improved availability of data, we are able to produce an improved cross-country econometric model to test well-established and more recent hypotheses jointly. We do not find that the common law system, or a past as a British colony predicts corruption. Our results support cultural theories on the causes of corruption, and suggest that a medium-long exposure to uninterrupted democracy is associated with lower corruption levels, while political instability tends to raise corruption. Our results also suggest that the diffusion of newspapers helps to lower corruption levels.      

Does easy availability of cash affect corruption? Evidence from a panel of countries

Using annual panel data of 54 countries for the period 2005-14, we examine whether currency in circulation, both aggregate and in large denominations, affects the level of corruption in a country. Standard panel data models suggest that the ratios of (i) aggregate currency in circulation to M1 and, (ii) large denomination banknotes to M1 are both statistically significant determinants of corruption. Tests for reverse causality within a panel Granger framework reveal a uni-directional causality of corruption with the first variable, but a bi-directional one with the second. These findings suggest that a limitation in the supply of high-denomination banknotes, inter alia, could be a tool to fight corruption, and bring to the fore the important role of payment systems, extending an earlier study by Goel and Mehrotra (2012). The results also highlight that, along with the government, the central bank of an economy can also play an important role in the fight against corruption.     

The impact of political instability on risk‐taking in the banking sector: International evidence using a dynamic panel data model (System‐GMM)

This paper contributes to the existing literature by investigating the impact of political instability risk on risk‐taking in the banking sector of 75 countries, which is the first attempt for this nexus to the best of our knowledge. The dynamic panel data model (System‐GMM) showed that political instability risk significantly increases risk‐taking in the banking sector. Besides, corruption levels and government ineffectiveness are the most important channels of political instability that affect the banking sector risk. The results also actively support the “too big to fail” hypothesis. Finally, the robustness results confirm the conclusions derived from the baseline System‐GMM model.     

司法良知是司法职业道德的根本核心

法官是法治的灵魂、核心。司法腐败的根本原因在于法官司法良知缺失。法官的司法良知是法官职业道德的根本、核心,是法官综合素质中的灵魂、核心,是法官办案质量的根本保障,是判断法官优劣的根本标准。强化法官司法良知是法官队伍建设的中心任务、核心任务,是遏制和消除司法腐败的根本途径。     

Is privatization related to corruption? An empirical analysis of European countries

This study analyses the relationship between privatization and corruption in Europe over the period 1995 to 2013, taking into account the problems surrounding the issue of causality. There have been researches into the role of privatization in reducing corruption, but decisions about privatization itself are made by politicians, and so corruption could also affect decision making about privatizations. The empirical findings suggest that perceived corruption decreases as the number of privatization transactions increases, but the effect is contrary when privatizations are a more important in terms of annual revenues. Furthermore, our results indicate that overall, privatizations carried out since the early 1980s have not been effective in reducing corruption in Europe. Indeed, privatizations reforms are more carried out in the less corrupt countries.     

Growth, public investment and corruption with failing institutions

Corruption is thought to prevent poor countries from catching up with richer ones. We analyze one channel through which corruption hampers growth: public investment can be distorted in favor of specific types of spending for which rent-seeking is easier and better concealed. To study this distortion, we propose a dynamic model where households vote for the composition of public spending, subject to an incentive constraint reflecting individuals’ choice between productive activity and rent-seeking. In equilibrium, the structure of public investment is determined by the predatory technology and the distribution of political power. Among different regimes, the model shows a possible scenario of distortion without corruption in which there is no effective corruption but the possibility of corruption still distorts the allocation of public investment. We test the implications of the model on a set of countries using a two-stage least squares estimation. We find that developing countries with high predatory technology invest more in housing and physical capital in comparison with health and education. The reverse is true for developed countries.      

Rule of Law and Rules‐Lawyering: Legal Corruption and ‘Reprivatization Business’ in Warsaw

Delving into the nexus between the state and informality, this paper discusses the informality of the legal and judicial systems. Produced by structurally powerful actors, this kind of informality is not so much legitimized by the law, but concealed within the very process of legitimization. To capture how legal engineering welds formalized laws with informal translations, I look at judicial outcomes that, while formally legal, are socially delegitimized and perceived as legal corruption. After analysing the contested judicial outcomes of Warsaw's ‘reprivatization’ process (property restitution), I define the mechanism of legal corruption as rules‐lawyering, by which I mean an attempt to gain legal advantage by obsessively sticking to the written laws, while deliberately desecrating its spirit. I describe three of its mechanisms: appropriation, redefinition and fraud laundering. Finally, in my preliminary vivisection of the recent and ongoing process of delegalizing the legal corruption that has been part of the reprivatization process, all the allied concepts of this forum come together to demonstrate the essential inseparability of informality and state.     

Is corporate tax avoidance associated with investment efficiency?

The purpose of this study is to examine the association between investment efficiency and corporate tax avoidance. Using a large sample of U.S. firms over the period 1993–2016, we show that there is a positive association between corporate tax avoidance activities and investment inefficiency. Moreover, we find that the association is mediated by financial statement readability, financial statement comparability and product market competition. Our results are robust to alternative measures of both tax avoidance and investment inefficiency. Propensity score matching (PSM), difference-in-difference (DID), and two-stage least squares (2SLS) regression analyses confirm our results and mitigate any potential endogeneity issues that might result from the effect of omitted variables, reverse causality or model misspecification.     

Corruption, economic growth, and income inequality in Africa

This paper uses panel data from African countries and a dynamic panel estimator to investigate the effects of corruption on economic growth and income distribution. I find that corruption decreases economic growth directly and indirectly through decreased investment in physical capital. A unit increase in corruption reduces the growth rates of GDP and per capita income by between 0.75 and 0.9 percentage points and between 0.39 and 0.41 percentage points per year respectively. The results also indicate that increased corruption is positively correlated with income inequality. The combined effects of decreased income growth and increased inequality suggests that corruption hurts the poor more than the rich in African countries. Received: March 19, 2001 / Accepted: December 14, 2001 RID="*" ID="*" An earlier version of this paper was presented at the first AmFiTan International Conference on Development Ethics in February 2000, Dar er Salaam, Tanzania. I thank two anonymous referees of this Journal for helpful suggestions. I am, however, solely responsible for any remaining errors.     

Victim or Victimizer: Firm Responses to Government Corruption

What is the relationship between government corruption and firm performance? To address this question, I conduct a review of articles published in the leading management journals on government‐business interactions pertaining to rent‐seeking activities and integrate findings from the fields of international business, social issues in management, public organization, institutional change, and corporate political activity. I find that while much empirical work corroborates the earlier findings suggesting a corrosive impact of government corruption on firm performance in general, management research also points to the heterogeneous impact of government corruption on individual firm performance, driven by the strategic activities conducted by firms in response to corruption. I propose an integrative model of firm strategy vis‐à‐vis corruption that predicts the activity choice of the firm as predicated by its organizational structure, political resources, industry regulation, and surrounding political and social institutions.     

Exports and cross-national corruption: A disaggregated examination

This paper empirically examines the relation between categories of exports and corruption across countries. Aggregate exports and agricultural exports tend to decrease corruption, while fuel exports increase corruption. The influence of agricultural exports in more pronounced in more corrupt nations, while fuel exports contribute to corruption in least corrupt nations. Manufacturing and ore exports, on the other hand, generally fail to show significant impacts on corruption. Our findings demonstrate that the resource curse is sensitive to prevailing corruption levels, and this finding is novel in the literature. Consistent with the extant literature, corruption decreases with income, and (at some corruption levels) as political freedom increases, and with larger government size. The findings are fairly robust to an alternate corruption measure.     

Judicial checks on corruption in the United States

Judicial oversight provides an important check on executive and legislative power. Two components of judicial oversight have been identified in the literature: judicial independence and constitutional review. Recent research using country-level data indicates that the effectiveness of constitutional review is largely determined by the rigidity of the constitution. In this paper, I use state-level data to test whether judicial independence and constitutional rigidity are related to a specific type of abuse of power by government officials: corruption in office. Specifically, I fit negative binomial regressions in which the dependent variable is the number of officials convicted for corrupt acts and the independent variables are (i) measures of judicial independence, such as judges’ remuneration, method of appointment, and term length, along with various controls or (ii) measures of constitutional rigidity, such as legislative majorities required to propose constitutional amendments and provisions for constitutional conventions or constitutional initiatives, along with various controls. I find that, in general, states with higher levels of judicial independence and more rigid constitutions have lower levels of corruption per capita than states with the opposite characteristics.     

Judiciaries in corrupt societies

Recent empirical work shows that judicial dependence can explain high levels of corruption. This paper examines how the dependence of judiciaries influences corruption at different levels of the government in a model where the central government, low-level officials, and the judiciary are corrupt. In the model, the central government sells offices to low-level officials and demands ex-post payments enforced by the judiciary. Because an independent judiciary can rule against the central authority and accept bribes from stealing low-level officials, it reduces corruption at the higher level of government but promotes corruption at the lower level. Therefore, even if highly corrupt, an independent judiciary may reduce total corruption.     

Slapping the Grasping Hand

A bstract The international community is redoubling efforts to curb political corruption in the developing and transitional economies. The consensus now is that the abuse of public office stunts economic growth, replacing a formerly dominant view that the effect is neutral or positive. Corruption's political correlates, however, are seldom studied empirically. Using Transparency International's recently developed index of perceived corruption. this paper explores this issue by regression analysis in a sample of less-developed countries. Economic liberalization, political democratization, and administrative centralization are associated with lower degrees of political corruption.     

Preventing rather than punishing: An early warning model of malfeasance in public procurement

Is it possible to predict malfeasance in public procurement? With the proliferation of e-procurement systems in the public sector, anti-corruption agencies and watchdog organizations have access to valuable sources of information with which to identify transactions that are likely to become troublesome and why. In this article, we discuss the promises and challenges of using machine learning models to predict inefficiency and corruption in public procurement. We illustrate this approach with a dataset with more than two million public procurement contracts in Colombia. We trained machine learning models to predict which of them will result in corruption investigations, a breach of contract, or implementation inefficiencies. We then discuss how our models can help practitioners better understand the drivers of corruption and inefficiency in public procurement. Our approach will be useful to governments interested in exploiting large administrative datasets to improve the provision of public goods, and it highlights some of the tradeoffs and challenges that they might face throughout this process.     

International corruption and its impacts across entrepreneurship types

Using a large cross‐country sample, this paper examines the impact of corruption on entrepreneurial activities by uniquely addressing two questions: (a) Does the impact of corruption on entrepreneurship vary across entrepreneurship type? (b) How does the effect of corruption differ across nations with varying prevalence of entrepreneurship? Considering three dimensions of entrepreneurship, nascent entrepreneurship, new business owners, and established new business owners, results, accounting for possible two‐way causality, show that entrepreneurship is negatively affected by corruption across entrepreneurship types, with differences in the relative magnitudes of effects. This sanding effect of corruption, however, varies across the prevalence of corruption and switches to greasing for nascent entrepreneurs.     

Rights and judicial independence

This paper models endogenous judicial independence (JI) as a commitment device in a political commitment game between a ruler and citizens. In a situation where citizens can observe the effectiveness of JI with some positive probability, the model shows that the ruler in fact creates an independent judiciary and credibly commits to an announced tax rate, i.e., the ruler protects private property rights. Even when citizens have no chance to observe the effectiveness of JI, the ruler can still guarantee property rights by granting human rights as a signal of JI. Although the creation of JI achieves a Pareto improvement compared with its lack, two sources of inefficiency arise. First, the equilibrium tax is inefficiently high in the sense that the tax rate is on the inefficient side of the Laffer curve. This inefficiently high tax reflects the cost of credible commitment. Second, equilibrium JI for guaranteeing human rights is inefficiently high in the sense that the ruler does not entirely use JI for credibly committing to a low tax. This inefficiently high JI represents the cost of credible signalling.     

Local Political Corruption: Potential structural malfunctions at the central–local,local–local and intra-local levels

Abstract

Despite growing preoccupation on the part of both the public and researchers with the concept of political corruption and the ‘corruption eruption’ phenomenon, research studies addressing corruption in local government are few and far between. This exploratory research offers a theoretical conceptualization of institutionalized corruption in local government, and identifies structural factors that lead to such corruption. Further, this study empirically assesses institutional corruption at the local level and its correlation to attitudes and characteristics of local authorities and their populations, based on a survey of 1,709 residents of 156 local authorities in Israel and data on the local authorities from a separate database. This article proposes a model according to which local corruption arises from structural factors at three levels: the central–local level (relations between local authorities and the central government); the local–local level (competition between local authorities) and the intra-local level (factors relating to the performance of local councils and local democracy). Our analyses reveal correlations among characteristics of the local authority and community, residents' perceptions of local performance and perceptions of local corruption. Implications of the findings in light of strategies conventionally employed against corruption in local government are discussed.     

Privilege and Corruption: The Problems of China's Socialist Market Economy

It is well known that China's corruption problem has become more and more serious during the period of economic reform. This paper examines China's corruption problem with the help of several simple economic models. The author proposes the concepts of implicit corruption and explicit corruption. We explain how the granting of privileges has directly created implicit corruption in China's socialist market economy. We argue that the long-term existence of the same privileged group in Chinese society has led to widespread collusion among its members, and as a result, these privileged group members, by utilizing their monopoly power, are able to seize almost all the wealth created by the ordinary Chinese people. This seizure is accomplished by means of a two-part tariff in pricing their administrative service, which is the essence of the explicit corruption. Finally, we point out that, because both implicit corruption and explicit corruption are generated by China's political system, which grants and protects privileges, unless a political reform is initiated and privileges are eliminated, China's problem of corruption will never be solved.