Harassment, corruption and tax policy: a comment on Marjit, Mukherjee and Mukherjee [Eur. J. Political Economy 16 (2000) 75–94]

This comment on Marjit, Mukherjee and Mukherjee [Eur. J. Political Economy 16 (2000) 75–94] shows that their basic model can be simplified by an alternative formulation. A corrupt auditor gives two choices to a taxpayer: pay bribe and evade tax or be overtaxed. Although harassment can be redressed through court, the taxpayer chooses to pay bribe. However, as this note discovers, the bribe–income ratio will critically depend on whether the taxpayer can afford the court fees. This may lead different income groups to have different preferences for corruption.     

Machiavelli & Modern Business: Realist Thought in Contemporary Corporate Leadership Manuals*

Niccolo Machiavelli’s teachings have never gone out of fashion; no doubt because power remains a central aspect of modern political and corporate life. The writings of this 16th century thinker seem as relevant today as they were a half millennium ago. Given the immutable nature of human beings, this is hardly surprising. What is surprising is the regular stream of monographs published in the last third of the 20th century, and reaching a crescendo in the last decade, that argue for Machiavelli’s relevance to modern management and corporate leadership. This essay will examine the structure, assumptions and conclusions of these manuals. After reviewing the manuals, this essay concludes that certain of these assumptions upon which these manuals are based are not transferable from a 16th century principality to a 21st century corporation. Not surprisingly, the teachings of these manuals concerning morality and the corporation are either inconsistent with the actual teachings of Machiavelli, or fail to acknowledge the teachings of Machiavelli most relevant to the modern corporate world. *A substantially modified version of this article was originally presented as a paper at the International Conference on Social Values held at the University of Oxford in July, 2004, and was reprinted in Samuel M. Natale, ed., The Fate of Empires: Education in a Consilient World (New York: Global Scholarly Publications, 2005). Peter J. Galie is professor of Political Science and Director of the Raichle Pre-Law Center at Canisius College. He received his PH.D. from the University of Pittsburgh in 1970. He has published numerous articles in the area of state constitutional law, two books entitled The New York State Constitution: A Reference Guide (Greenwood Press, 1991) and Ordered Liberty: A Constitutional History of New York (Fordham University Press, 1996). Professor Galie was selected as the Wilson College Olive Garvey White outstanding teacher in 1967, and was the recipient of the Kenneth L. Koessler Distinguished Professor Award, Canisius College, 1998. Christopher Bopst is an associate in the commercial litigation department at the law firm of Adorno & Yoss LLP in Miami, Florida. He received his B.A. from Canisius College in Buffalo, New York (1995) and his J.D. from Notre Dame Law School in Notre Dame, Indiana (1998). Mr. Bopst has written several articles on state constitutional law and other topics of interest to the legal community. He has also presented papers at various conferences and lectured to numerous groups about various legal issues.     

Corruption and cross-border investment by multinational firms

Motivated by previous studies on the effect of corruption on foreign direct investment, we examine the impact of a distance measure of corruption between host and source countries on cross-border direct investment and find that corruption distance deters cross-border investment. The evidence indicates that corruption distance is not as serious a deterrent of outward direct investment from more-corrupt countries as it is from less-corrupt countries. We conclude that multinational firms with the capacity to engage in bribery can disregard this activity in transparent environments, whereas multinational firms accustomed to operating in transparent environments find it difficult to overcome the administrative complexities in corrupt environments. Journal of Comparative Economics 34 (4) (2006) 839–856.     

Money laundering—a global obstacle

One of the biggest obstacles to maintaining an effective operating international financial system is money laundering. A global phenomenon and international challenge, money laundering is a financial crime that often involves a complex series of transactions and numerous financial institutions across many foreign jurisdictions. In addition, money laundering is also extremely difficult to investigate and prosecute. In this paper, I present a clinical examination of the money laundering process, the international extent of the problem and global efforts to introduce anti-money laundering measures and regulation in recent years.     

寻租与腐败的经济学分析

转轨时期,在市场机会大幅增加而制度约束处于不完备的状态下出现了权力资本化现象,导致受权力租金诱惑的政府官员产生出租权力以获得私利的动机与行为,从而形成寻租与腐败蔓延的现象。因此强化权力监督、实行“以薪养廉”,并逐步使政府退出市场就成为抑制寻租与腐败的根本对策。     

Fiscal centralization and the form of corruption in China

Fiscal recentralization in China in the 1990s introduced incentives that changed the form of corruption at the local government level from the helping-hand to the grabbing-hand type. Against the background of the experience of China, this paper describes how the central–local government revenue-sharing rule introduces strategic considerations that affect the form of corruption and thereby economic growth. Information regarding the possibilities for substitution in the form of corruption is shown to be relevant for decisions regarding fiscal centralization. However, the consequences of the decisions made in China suggest that such information was either not available or was not taken into account.     

Impact of electoral competition,swing voters and interest groups on equilibrium policy platforms: Exploring the strategic forces at work

This paper constructs a stylized model of election between two opportunistic candidates who can influence equilibrium policy platforms in exchange for monetary contributions provided by two distinct lobby groups. Two key features are embedded which give rise to a dual uncertainty in the model: the existence of partisan spread across voter groups as well as the embezzlement of campaign funds received by the electoral candidates from the interest groups. We derive and compare the equilibrium platforms of the two office-seeking candidates in three scenarios: none of the above uncertainties exist (benchmark case), only uncertainty about voters’ preferences exist (swing-voter case), and both the uncertainties exist (swing voters and lobby groups case). We find that an opportunistic candidate’s swing-voter tax platform is always lower than the benchmark tax platform. Additionally, the equilibrium tax choice of electoral contenders in the swing voters and opposing lobby groups case is found to be greater than the tax level chosen under the swing-voter case if the lobby group advocating a greater level of tax is sufficiently well-organized such that it outweighs the relative swing-voter effect in that group. Furthermore, we find that when an electoral candidate transitions from being highly corrupt to becoming relatively more honest, the equilibrium level of public good provision adjusts in conformity with the well-organized group’s economic preferences. Finally, if the strength of relative lobbying effect is weaker, a lower partisan bias within that group induces an electoral candidate to choose a tax platform closer to that group’s policy bliss point.     

Does Aid Unpredictability Weaken Governance? Evidence from Developing Countries

This paper examines the effects of aid on governance from a different perspective by asserting that aid unpredictability can potentially increase corruption in recipient countries by providing incentives to risk‐averse and corrupt political leaders to engage in rent‐seeking activities. Analyses of data from 80 developing countries over the period 1984–2004 offer evidence that higher aid unpredictability is associated with more corruption as measured by a synthetic index. We also find further evidence that this latter impact is more severe in countries with weak initial institutional conditions. These findings are a supplementary advocacy for the need for better management and better predictability of aid flow in developing countries.     

Preemptive collusion among corruptible law enforcers

This paper considers collusion between a supervisor and an agent within a Principal–Supervisor–Agent model. Other papers consider the possibility of collusion after the supervisor has exerted costly effort to obtain hard (“verifiable”) evidence regarding the agent’s actions, information which, if reported would result in the agent being fined with a certain probability. That is, collusion occurs because the supervisor may accept a bribe in exchange for hiding the information he has obtained. This paper allows the supervisor and the agent to enter into a collusive contract either before or after the supervisor has exerted effort to find verifiable information regarding the agent’s actions. The former type of collusion, which occurs after the supervisor has exerted effort, entails ex-post corruption, while the latter, which occurs before the supervisor has exerted effort, entails preemptive corruption. This paper shows that although raising the supervisor’s reward discourages ex-post corruption, it can simultaneously encourage preemptive corruption. Hence, raising the supervisor’s reward will not always discourage collusion. This result further implies that though privatizing law enforcement can always be used to eliminate ex-post corruption, it cannot be used to eliminate preemptive corruption. Furthermore, when compared to ex-post collusion, an equilibrium without corruption is always socially preferred. However, when compared to preemptive collusion, an equilibrium without corruption may not always be socially preferred.     

Corruption in public service delivery: An experimental analysis

To improve our understanding of corruption in service delivery, we use a newly designed game that allows us to investigate the effects of the institutional environment on the behavior of service providers and their monitors. We focus on the effect of four different factors: whether monitors are accountable to the service recipients, the degree of observability of service providers’ effort, the providers’ wages and the providers’ professional norms. In accordance with theory, we find that service providers perform better when monitors are elected by service recipients and when their effort is more easily observed. However, there is only weak evidence that service providers perform better when paid more. Monitors are more vigilant when elected and when service providers are paid more. Playing the game with Ethiopian nursing students, we also find that those with greater exposure to the Ethiopian public health sector perform less well, either as provider or as monitor, when the experiment is framed as a public health provision scenario, suggesting that experience and norms affect behavior.