Obesity of politicians and corruption in Ukraine in 2000–2020– Reply

We collected 469 frontal face images of Ukrainian cabinet ministers who were in office in 2000–2020. For each image, the minister's body mass index was estimated using a computer vision algorithm. The time series of median estimated body mass index of cabinet ministers co-moves over time with two existing measures of corruption – World Bank worldwide governance indicator Control of Corruption, and the discrepancy between the quantity of luxury wristwatches exported from Switzerland to Ukraine (reported by Swiss statistics) and the corresponding quantity imported by Ukraine from Switzerland (reported by Ukrainian statistics).     

Measuring the Effect of Corruption on Sovereign Bond Ratings

Abstract

Instrumenting for sovereign corruption, we find that Transparency International’s Corruption Perceptions Index which ‘ranges from 10 (highly clean) to 0 (highly corrupt)’, is a significant predictor of the Standard and Poor’s sovereign bond ratings ranging from 1 (Sovereign Default) to 22 (AAA) in panel data from 52 countries from 1993 to 2002. Corruption downgrades the creditworthiness of sovereign bonds by diverting loan proceeds from productive projects to less productive ones, if not to offshore accounts. In particular, a one point worsening of the corruption perception index leads to an estimated one‐notch reduction out of 22 in the sovereign bond rating.     

Electoral cycles in perceived corruption: International empirical evidence

I examine whether elections influence perceived corruption in the public sector. Perceived corruption in the public sector is measured by the reversed Transparency International's Perception of Corruption Index (CPI). The dataset includes around 100 democracies over the period 2012–2016, a sample for which the CPI is comparable across countries and over time. The results show that the reversed CPI was about 0.4 points higher in election years than in other years, indicating that perceived corruption in the public sector increased before elections. The effect is especially pronounced before early elections (1.0 points) compared to regular elections (0.4 points). Future research needs to investigate why perceived corruption in the public sector increased before elections.     

Explaining the standard errors of corruption perception indices

This paper examines the standard errors of two popular indices of corruption perceptions: the Worldwide Governance Indicators’ Control of Corruption (WGI-CC) and Transparency International's Corruption Perception Index (TI-CPI). The standard errors of these indexes stem from the degree of variation across the sources upon which these two aggregate indices are based. In general, standard errors are not associated with country characteristics; this supports the common assumption that differences across surveys are random. There are two exceptions, however. They involve the degree of media freedom in a country and the country's past corruption scores, possibly indicating the use of cognitive heuristics by the assessors who do the ratings. No evidence exists that more diverse countries have greater variation across corruption scores. In comparing the two aggregate measures, we find that the standard errors for TI-CPI are associated with country characteristics in fewer cases than are those for WGI-CC. Finally, our findings raise concerns about the applicability of the WGI-CC's use of the unobserved components model for extracting signals from noise.     

Corruption and economic growth: New empirical evidence

The nexus between corruption and economic growth has been examined for a long time. Many empirical studies measured corruption by the reversed Transparency International's Perception of Corruption Index (CPI) and ignored that the CPI was not comparable over time. The CPI is comparable over time since the year 2012. We employ new data for 175 countries over the period 2012–2018 and re-examine the nexus between corruption and economic growth. The cumulative long-run effect of corruption on growth is that real per capita GDP decreased by around 17% when the reversed CPI increased by one standard deviation. The effect of corruption on economic growth is especially pronounced in autocracies and transmits to growth by decreasing FDI and increasing inflation.     

Cultural Dimension of Corruption: A Cross-Country Survey

This study investigates whether culture plays a major role in determining the corruption levels of countries. The cultural dimensions of Hofstede’s model and the worldwide level of corruption provided by the Corruption Perceptions Index were used. A cross-country survey of 98 countries was conducted using ordinary least squares (OLS) regression. Three of the six main components of Hofstede’s model were found to have a significant influence on corruption, namely power distance, individualism-collectivism, and long- versus short-term orientation. National culture may explain the level of corruption in each of the countries. About half of the level of corruption in countries is explained by the national culture. Governments must acknowledge the role of culture in order to adopt the most appropriate policy decisions to fight corruption.     

Corruption and the Political Economy of Resource-Based Development: A Comparison of Asia and Sub-Saharan Africa

We model how the “supply and demand” for bribes affects resource use by an economy, and the reinvestment of resource rents in other assets. This requires adjusting the World Bank’s measure adjusted net savings for any rent dissipation due to corruption. The impacts of corruption on long-run changes and periodic growth in the adjusted net savings rate are estimated across African and Asian economies from 1970 to 2003. Corruption rather than resource dependency per se affects negatively the ability of African countries to reinvest resource rents in the short term, but for Asian countries, corruption is less important than point resources. Corruption influences long-run growth in adjusted net savings rates in all countries, and is also the “pathway” through which this growth is affected by patterns of resource use, trade and abundance.     

A panel data analysis of the effect of corruption on tourism

This study empirically tests the hypothesis that corruption has a negative effect on tourism. Having to pay bribes while on holiday or a business trip increases the costs of travelling to a country where corruption is prevalent. Tourists are thus more likely to travel to countries where these additional costs do not need to be incurred. This hypothesis is tested using a panel data set of over 100 countries and 16 years. The results indicate that a 1-point increase in the Corruption Perception Index (implying a decrease in corruption) results in a 2% to 7% increase in tourist inflows. In addition, tourist inflows rise with GDP per capita, openness and growth and are higher in countries with a temperate climate.     

Evidence on corruption as an incentive for foreign direct investment

This paper assesses the relationship between corruption and inward foreign direct investment (FDI). Previous research has presumed that corruption directly enters the cost function of multinationals, suggesting a negative relationship between corruption and FDI. For a sample of 73 developed and less developed countries and the time period 1995–1999, we find a clear positive relationship between corruption and FDI. Corruption is thus a stimulus for FDI.     

Does corruption hamper bank lending? Macro and micro evidence

The aim of this paper is to analyze the effect of corruption in bank lending. Corruption is expected to hamper bank lending, as it is closely related to legal enforcement, which has been shown to promote banks’ willingness to lend. Nevertheless the similarities between the consequences for bank lending of law enforcement and corruption are misleading, as they consider only judiciary corruption. Corruption can also occur in lending and may then be beneficial for bank lending via bribes given by borrowers to enhance their chances of receiving loans. This assumption may be validated particularly in the presence of pronounced risk aversion by banks, resulting in greater reluctance on the part of banks to grant loans. We perform country-level and bank-level estimations to investigate these assumptions. Corruption reduces bank lending in both sets of estimations. However, bank-level estimations show that the detrimental effect of corruption is reduced when bank risk aversion increases, even leading at times to situations wherein corruption fosters bank lending. Additional controls show that corruption does not increase bank credit by favoring only bad loans. Therefore, our findings show that while the overall effect of corruption is to hamper bank lending, it can alleviate firm’s financing obstacles.     

Exploring differences in corruption: the role of neighboring countries

The aim of this paper is to study whether corruption spreads across neighboring countries. Spatial econometric techniques are used to analyze corruption interactions, testing whether the perception of corruption in neighboring countries affect a country’s own corruption once other variables are controlled for. For a given country it is found that corruption varies neither with the behavior of its neighbors (there is no endogenous interaction) nor with their exogenous characteristics (there is no contextual interaction). Corruption is therefore not contagious, but neighboring countries tend to show similar levels of corruption because they face similar characteristics and similar institutional environments.     

The effects of federal regulations on corruption in U.S. States

Using the newly constructed Federal Regulation and State Enterprise Index (FRASE Index) to measure the federal regulations and the existing Corruption Convictions Index (CCI), we investigate the effects of federal regulations on corruption in U.S. states. Controlling for several demographic and economic variables including the Fraser Institute’s Economic Freedom Index (EFI), which measures the size and scope of government in U.S. states, we find a positive and statistically significant relationship between federal regulations and corruption. Our findings have important policy implications. A 1 standard deviation increase in FRASE Index causes CCI to increase by approximately 0.5 standard deviations. Standardized coefficient of EFI is also approximately equal to 0.5. In other words, it is possible to mitigate the effects of regulations at the federal level by reducing the size and the scope of the government at the state level.     

Corruption clubs: empirical evidence from kernel density estimates

A common finding of many analytical models is the existence of multiple equilibria of corruption. Countries characterized by the same economic, social and cultural background do not necessarily experience the same levels of corruption. In this article, we use Kernel Density Estimation techniques to analyse the cross-country distribution of corruption. Particular emphasis will be given to the question whether the distribution of corruption shows more than one peak. We find that most of the estimated densities exhibit twin peaks. We also provide some evidence on the intra-distribution dynamics and the persistence of corruption. We find the group of countries classified within the two ‘clubs’ to be very stable. Corruption is a highly persistent phenomenon. Substantial changes in the economic, political and cultural environment of countries within the ‘corruption club’ are required before a significant decline of corruption is to be expected.     

经济转轨、集体腐败与政治改革--基于中国转轨经验的经济学分析

腐败是经济转轨国家中普遍存在的现象,中国当前的腐败问题呈现集体腐败的特征.文章主要是运用博弈理论对集体腐败行为进行解释.文章证明了在中国这样的经济转轨国家,由于缺乏一个独立的监督机构,一般都是上级官员作为其下级官员的监督者,他们非常容易合谋,形成集体腐败.随后文章对中国集体腐败问题做了实证分析,并且提出了相应的政治改革措施.     

The effect of corruption on microfinance loan portfolio: A semiparametric analysis

In this paper, we examine the extent to which corruption affects the loan portfolio of microfinance institutions (MFIs). We employ robust econometric estimation on a sample of 507 MFIs across 63 countries from 2005 to 2018. Our results show that corruption is negatively associated with the loan portfolio. However, in semiparametric analysis, we find that lower-level corruption is beneficial to increase the loan portfolio while higher-level corruption is detrimental. The results imply that it is not just corruption that matters as far as its effect on MFIs' loan portfolio is concerned; what matters is the degree of corruption. In further analyses, we find that corruption reduces both the number of active borrowers and average loan per borrower indicating that corruption reduces both coverage and amount of credit extension. The results suggest that the effect of corruption on the loan portfolio is gender-sensitive. Corruption facilitates an increase in loans to female borrowers. Our results are robust to alternative variable measurements and different identification strategies, including two-stage least square.     

Politicians at higher levels of government are perceived as more corrupt

The relationship between decentralization and corruption has been discussed extensively, but little is known about the variation of corruption across government levels. Using an original survey where French citizens were asked to assess corruption at all levels of government, we observe that corruption perceived at a government level is higher, the higher the government level in the government hierarchy. Specifically, municipal governments are perceived as the least corrupt, followed by local governments, senators, deputies, and the national cabinet. The president of the Republic is perceived as slightly less corrupt than the national cabinet, but more corrupt than any other level of government. The relationship is robust to alternative specifications, controlling for a series of individual and regional characteristics, and to alternative definitions of the dependent variable. The finding is not reducible to geographic distance. We observe it in several other countries.     

Corruption and wage inequality?

Does corruption aggravate wage-inequality? We try to answer this question in terms of a general equilibrium model where both skilled and unskilled workers participate in corruption. Corruption in our model diverts resources from the productive sectors. Factor intensities within the productive sectors and between production and corruption activities determine the wage impact of corruption. Lower degree of corruption may increase wage-inequality although the size of the corruption sector definitely contracts.     

Distribution and development in a model of misgovernance

This paper presents an analysis of bureaucratic corruption, income inequality and economic development. The analysis is based on a dynamic general equilibrium model in which bureaucrats are appointed by the government to implement a redistributive programme of taxes and subsidies designed to benefit the poor. Corruption is reflected in bribery and tax evasion as bureaucrats conspire with the rich in providing false information to the government. In accordance with empirical evidence, the model predicts a positive relationship between corruption and inequality, and a negative relationship between corruption and development.     

Corruption and Policy: Back to the Roots

Corruption is now recognized to be a pervasive phenomenon that can seriously jeopardize the best-intentioned reform efforts. This paper presents an analytical framework for examining the role basic market institutions play in rent-seeking and illicit behavior. The empirical results suggest that high barriers to new business entry and soft budget constraints on incumbent firms are particularly important institutional factors engendering opportunities for corruption. The findings also support the notion that economic development and maturation of democratic processes both temper corruption, as does, to a lesser extent, openness to international trade.     

A SIMPLISTIC GENERAL EQUILIBRIUM THEORY OF CORRUPTION

The author's simplistic view of corruption is that all politicians and government officials—like everyone else—are constrained self-maximizers. They therefore establish or maintain regulations and controls with the intent to facilitate corruption, which then becomes a source of income for them. Under private enterprise, where resources are transferable and movable, competition limits the ability to corrupt. However, in state enterprises, limiting corruption through competition is difficult. Corruption can help offset the inefficiencies of a communist or hierarchical system, as the economy makes a transition toward private property. But the danger is that corruption will become institutionalized and develop well-defined, transferable rights. Once that happens, the economy gets stuck there, as it has in India. Thus, in reforming a communist system—as that of China—into a private property system, gradualism will not do.