Can bribery buy health? Evidence from post-communist countries

Corruption is pervasive, but we know little about its effects on individual lives. Using individual-level data from 28 post-communist countries, we demonstrate that bribing for public services worsens self-assessed health. We account for endogeneity of bribery and show that bribing for any type of public service, not just for health services, has an adverse impact. We also find that bribery lowers the quality of services received. Moreover, there are potentially high indirect costs of bribery since, as we show, it comes at the expense of cutting food consumption. These findings suggest that corruption is a potentially important source behind the poor health outcomes in many developing countries.     

Inequality aversion in post-communist countries in the years of the crisis

This article provides estimates for the parameters of inequality aversion for 10 post-communist economies of central and eastern Europe in the years of the crisis. To this aim, we employ the information on the level of tax progressivity available in the European Union Survey on Income and Living Conditions cross-sectional microdata, under the assumption that the principle of equal sacrifice drives the choices of governments on marginal tax rates. Results reveal a remarkable variety of preferences for redistribution across the countries during the time period considered (2008–2012), with some of them converging towards the generally higher inequality aversion levels of the western European Union, perhaps as a result of policy responses to the crisis.     

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.     

Entrepreneurship,trust and corruption

I propose a theoretical model where trust towards strangers is a channel through which institutions determine economic outcomes, in particular, entrepreneurship and corruption. More importantly, I show that the role of trust has been overlooked since high levels of trust do not always enhance desirable economic outcomes. Trust helps individuals to participate in economic exchanges aligned with social welfare, but it also facilitates individuals to cooperate for the achievement of corrupt deals. Under this more general view of trust, the model generates a non-trivial new prediction at the individual level. Specifically, the individual-level relationship between honesty and trust changes depending on the institutional quality of a country. Dishonest individuals are the more trusting individuals in countries with poor institutions, and the less trusting in countries with good institutions. Using individual-level data of 80 countries from the World Value Survey and the European Values Study, I present empirical evidence in support of this prediction.     

Political uncertainty and international corruption

This article uniquely considers influences of political uncertainty on corruption. Political uncertainty disturbs existing corrupt (and legal) contractual relations inducing greater corrupt activity to strengthen existing alliances and foster new ones. Results across two measures of cross-national corruption show that political assassinations increase corruption in different variations and time periods, and a general index of political instability mostly has the same effect. The influences of other factors on corruption are in general accord with the literature. These findings are generally robust to consideration of alternate dimensions of political uncertainty.     

Harassment, corruption and tax policy: reply

Saha [Eur. J. Polit. Econ. (2003)] has raised some points about our paper [Eur. J. Polit. Econ. 16 (2000) 75]. We herewith reply to these points.     

Market-related reforms and increased energy efficiency in transition countries: empirical evidence

Energy efficiency improvement is a desirable response to growing climate change and security of energy supply concerns. This article studies the impacts of a varied set of macro-level market-oriented reforms as well as structural change on economy-wide measure of energy efficiency across a group of the transition countries. These countries experienced a rapid marketization process, which, since the early 1990s, transformed their economies from central planning towards market-driven models. We use a bias-corrected fixed-effect analysis technique to estimate this effect for the period 1990 to 2010. The results suggest that reforms aimed at market liberalization, financial sector and most infrastructure industries drove energy efficiency improvements. We find significant differences in improvements in energy efficiency between transitional Central European and Baltic States, South East Europe ones and the Commonwealth of Independent States. The reasons for these differences are also discussed.     

Competition and corruption in an agency relationship

The paper reconsiders the relationship between competition and corruption in a model, where corruption has solid informational foundations and where the regulatory response to the possibility of corruption is taken into account. It is shown that the effect of greater competition on corruption depends on the complementarity or substitutability of the two instruments available to decrease information rents, namely low powered incentives and greater competition. The paper concludes with a brief empirical exploration of the relationship between competitiveness and corruption on African data.     

腐败对外国直接投资影响的实证分析

本文依据世界106个国家的截面数据．分析了腐败对外国直接投资（FDI）的影响。研究结果表明，腐败与FDI之间存在显著的负相关。但是，腐败对FDI的负面影响可以在一定程度上被诸如东道国经济开放和政治稳定等积极因素所抵消。     

Natural resources, democracy and corruption

We study how natural resources can feed corruption and how this effect depends on the quality of the democratic institutions. Our game-theoretic model predicts that resource rents lead to an increase in corruption if the quality of the democratic institutions is relatively poor, but not otherwise. We use panel data covering the period 1980-2004 and 124 countries to test this theoretical prediction. Our estimates confirm that the relationship between resource rents and corruption depends on the quality of the democratic institutions. Our main results hold when we control for the effects of income, time varying common shocks, regional fixed effects and various additional covariates. They are also robust across different samples, and to the use of various alternative measures of natural resources, democracy and corruption.     

Socio-economic typologies of bureaucratic corruption and implications

Corruption all over the world is an ancient, but it seems very topical too, concern in politics and in the media. This paper investigates spatial and dynamic aspects of corruption using cellular automata. Although cellular automata are very simple, deterministic machines and thus crude approximations of real, economic situations, they are capable of describing self organization and complex patterns (of corruption). It is shown that neither social pressure nor pure economic incentives allow for complex patterns, although social pressure may lead to clusters of corrupt and uncorrupt segments within a bureaucracy. However, blending both above characteristics is capable explaining complex behavior. Extending the concept of cellular automata through mixing rules – across space (= bureaucrats) and time (accounting for global effects) – does not affect the fundamental properties.     

Do rapid political and trade liberalizations increase corruption?

Corruption scandals seem to abound in countries that have undergone reform. However, there has been no study of whether different combinations of reforms cause an increase in corruption. Theory provides some guidance as to the direction of causality—on the one hand, reforms make politicians accountable to voters as well as introducing more competition, which should decrease corruption. On the other hand, reforms may not be credible, which provides for an incentive for corruption. This paper uses the numerous cases of political and economic liberalizations that occurred in the 1980s and 1990s to examine this issue. The findings are that undertaking both types of reforms in rapid succession leads to a decrease in corruption, while countries that liberalized more than 5 years after democratizing experienced an increase in corruption.     

Taxation,corruption, and growth

We build an endogenous growth model to analyze the relationships between taxation, corruption, and economic growth. Entrepreneurs lie at the center of the model and face disincentive effects from taxation but acquire positive benefits from public infrastructure. Political corruption governs the efficiency with which tax revenues are translated into infrastructure. The model predicts an inverted-U relationship between taxation and growth, with corruption reducing the optimal taxation level. We find evidence consistent with these predictions and the entrepreneurial channel using data from the Longitudinal Business Database of the US Census Bureau. The marginal effect of taxation for growth for a state at the 10th or 25th percentile of corruption is significantly positive; on the other hand, the marginal effects of taxation for growth for a state at the 90th percentile of corruption are much lower across the board. We make progress towards causality through Granger-style tests and by considering periphery counties where effective tax policy is largely driven by bordering states. Finally, we calibrate our model and find that the calibrated taxation rate of 37% is fairly close to the model׳s estimated welfare maximizing taxation rate of 42%. Reducing corruption provides the largest potential impact for welfare gain through its impact on the uses of tax revenues.     

The impact of liberalization on bureaucratic corruption

Liberalization increases the number of goods available for consumption within a country. Since bureaucrats value variety, this raises the marginal utility of accepting a bribe. This “benefit effect” is counteracted by an increasing “cost effect” from corruption deterrence activities that arise due to greater international pressure to curb corruption. The interaction of these two effects can lead to a non-monotonic relation between liberalization and corruption. Moreover, pre-commitment to deterrence activities is shown to be more effective in controlling corruption. Empirical evidence supports the existence of a non-monotonic relation between economic openness and corruption among developing countries.     

WTO membership and corruption

Despite widespread belief that accession process and formal membership to the World Trade Organization (WTO) improve the quality of governance within a country, there is no convincing empirical evidence to substantiate this thought. Here, I investigate whether the WTO status of a country has a causal effect on firm-level reports of political corruption using a nonparametric partial identification approach to bound the average treatment effects (ATEs). I also analyze conditional ATEs to explore various sources of potential heterogeneity. Contrary to popular belief, I find that WTO membership is likely to have no causal effect on domestic corruption overall. And if anything, it is likely to increase corrupt practices, particularly among firms that are established post WTO membership and those that are government owned.     

Incentives and corruption in chinese economic reform

This paper argues that, given the legacy of Chinese communism and its political structure, corruption, together with the threat of punishment for corruption and the selective enforcement of this threat, serves as a method of compensation that both satisfies the political objectives of the Communist Party and provides an effective inducement to local officials to promote economic reform.     

Crime and corruption in transitional economies: lessons for Cuba

Trends in aggregate crime rates across Europe reveal significant increases in crime in transitional countries. We identify causal mechanisms associated with the economic transition. Historical experience of corruption in the Soviet Union is reviewed, and connections between corruption and transition are analyzed. We apply the results to Cuba's current circumstances, examining the potential for growth in crime and corruption in Cuba and suggesting policies to ameliorate it.     

The effect of corruption on capital accumulation

This paper examines the effect of corruption in infrastructure development as well as in capital and labor markets, on capital accumulation and output in an overlapping generations model. Corruption affects income redistribution, government expenditures on infrastructure, firms’ incentive to invest, and workers’ incentive to supply labor. An increase in corruption in infrastructure development decreases capital accumulation and output if the decrease in the savings of ordinary workers is sufficiently large. An increase in corruption in the capital market decreases capital accumulation and output. An increase in corruption in labor market decreases capital accumulation and output when labor supply is completely inelastic. Simulation results based on plausible parameter values indicate that an increase in corruption in the labor market will also reduce labor supply, capital accumulation and output.      

Can self regulation work?: a story of corruption,impunity and cover-up

This paper analyzes the reputation-based incentives of a Self-Regulatory Organization (SRO) to detect and expose consumer fraud committed by its members, and the members’ incentives to bribe the SRO in exchange for a cover-up to avoid an external punishment. In a corruption-free benchmark, SROs are effective in detecting, exposing and deterring fraud only if exposure yields a reputation gain to the SRO, which depends on consumers inferences about the SRO’s type. However, if this case prevails the member can succeed in bribing the SRO in exchange for a cover-up and impunity. Despite this, a bribed SRO yields more vigilance and lower fraud than no self-regulation at all.      

The transition of corruption institutions and dynamics

The paper analyzes the strong but complex relation between corruption and development. The corruption/honesty index is explained by three variables measuring aspects of development: Income, Polity and Fraser (for Economic Freedom). The last two indices represent the political and the economic system. Two problems arise: (i) Development is a common factor in all four variables, giving the variables strong confluence, so it is difficult to sort out the contribution of each explanatory variable. However, kernel regressions on the corruption/income scatter give a well-defined long-run transition path, which permits an identification of the specific contributions of institutions to corruption. (ii) The correlation of corruption to the first difference of the three development variables is negative. This gives a substantial lag in the corruption/income relation in the form of wide J-curves, but the main direction of causality is still from development to corruption. High income and modern institutions cause low corruption after some time. The corruption/development-relation is a fuzzy but strong long-run connection.