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Combating Corruption: On the Interplay between Institutional Quality and Social Trust

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  • Christian Bj�rnskov
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    Abstract

    The aim of this paper is to explore under which conditions institutional quality leads to lower levels of corruption. A model of a simple economy in which firms choose both between bribing or not bribing bureaucrats to avoid costs and between entering the official or the unofficial economy shows that the effects of increasing institutional quality may be ambiguous because of perverse effects of institutions on the unofficial economy. Employing a recent index of corruption based on objective data, the paper shows that formal institutions are more effective in combating corruption in countries with high levels of social trust. The paper concludes by discussing the implications of the findings for welfare and politics.

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    File URL: http://www.jstor.org/stable/pdfplus/10.1086/652421
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    File URL: http://www.jstor.org/stable/full/10.1086/652421
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    Bibliographic Info

    Article provided by University of Chicago Press in its journal The Journal of Law and Economics.

    Volume (Year): 54 (2011)
    Issue (Month): 1 ()
    Pages: 135 - 159

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    Handle: RePEc:ucp:jlawec:doi:10.1086/652421

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    Web page: http://www.journals.uchicago.edu/JLE/

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    Cited by:
    1. Öhler, Hannes & Nunnenkamp, Peter & Dreher, Axel, 2012. "Does conditionality work? A test for an innovative US aid scheme," European Economic Review, Elsevier, vol. 56(1), pages 138-153.

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