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Threshold Effects of Corruption: Theory and Evidence

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  • Bose, Niloy
  • Capasso, Salvatore
  • Murshid, Antu Panini

Abstract

Summary We examine the impact of corruption on the quality of public infrastructure. We propose a model in which private vendors supply governments with inputs necessary for the production of public goods. Asymmetric information between the two parties creates opportunities for vendors to earn profits. These profits can be re-distributed to government bureaucrats without impacting on the contractual form, as long as firms do not operate at a loss. Thus corruption adversely affects the provision of public goods only when it crosses a threshold. These results are examined in a sample of up to 125 countries. Consistent with our theory, we find strong evidence of a "corruption threshold."

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Bibliographic Info

Article provided by Elsevier in its journal World Development.

Volume (Year): 36 (2008)
Issue (Month): 7 (July)
Pages: 1173-1191

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Handle: RePEc:eee:wdevel:v:36:y:2008:i:7:p:1173-1191

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Web page: http://www.elsevier.com/locate/worlddev

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Cited by:
  1. M. Emranul Haque & Richard Kneller, 2005. "Corruption Clubs: Endogenous Thresholds in Corruption and Development," The School of Economics Discussion Paper Series 0544, Economics, The University of Manchester.
  2. Prabir De, 2010. "Governance, Institutions, and Regional Infrastructure in Asia," Governance Working Papers 22878, East Asian Bureau of Economic Research.
  3. Jan Hanousek & Evžen Kočenda, 2011. "Corruption and Economic Freedom Links to Public Finance and Investment in New EU Members," Politická ekonomie, University of Economics, Prague, vol. 2011(3), pages 310-328.
  4. Serena Brianzoni & Raffaella Coppier & Elisabetta Michetti, 2012. "A Growth Model with Corruption in Public Procurement: Equilibria and Policy Implications," Working Papers 68-2012, Macerata University, Department of Finance and Economic Sciences, revised Nov 2012.
  5. Berg, Sanford V & Jiang, Liangliang & Lin, Chen, 2011. "Regulation and corporate corruption: new evidence from the telecom sector," MPRA Paper 32947, University Library of Munich, Germany.
  6. Jan Hanousek & Evžen Kočenda, 2011. "Public Investment and Fiscal Performance in the New EU Member States," Fiscal Studies, Institute for Fiscal Studies, vol. 32(1), pages 43-71, 03.
  7. Elisa Ascione & Manuela Scornaienghi, 2009. "Legal Agriculture: Farmland Confiscated from Organized Crime," QA - Rivista dell'Associazione Rossi-Doria, Associazione Rossi Doria, issue 3, August.
  8. Pál Csapodi & István Takács & Katalin György-Takács, 2011. "Corruption as a Deviant Social Attitude," Public Finance Quarterly, State Audit Office of Hungary, vol. 56(1), pages 27-43.
  9. Jan HANOUSEK & Evžen KOČENDA, 2010. "Public investment and fiscal performance in new EU member states," Departmental Working Papers 2010-07, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
  10. Prabir De, 2010. "Governance, Institutions, and Regional Infrastructure in Asia," Working Papers id:3029, eSocialSciences.
  11. Gillanders, Robert, 2013. "Corruption and Infrastructure at the Country and Regional Level," MPRA Paper 46679, University Library of Munich, Germany.

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