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The Political Economy of Corruption and the Role of Financial Institutions

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Author Info
Kira Boerner ()
Christa Hainz ()

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Abstract

In transition and developing countries, we observe rather high levels of corruption even if they have democratic political systems. This is surprising from a political economy perspective, as the majority of people generally suffers from high corruption levels. Our model is based on the fact that corrupt offcials have to pay an entry fee to get lucrative positions. In a probabilistic voting model, we show that a lack of financial institutions can lead to more corruption as more voters become part of the corrupt system. Well-functioning financial institutions, in turn, can increase the political support for anti-corruption measures.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 1293.

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Date of creation: 2004
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Handle: RePEc:ces:ceswps:_1293

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Related research
Keywords: corruption; financial markets; institutions; development; voting;

Other versions of this item:

Find related papers by JEL classification:
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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    Other versions:
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    Other versions:
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