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Measuring governance and state capture: the role of bureaucrats and firms in shaping the business environment

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Author Info

  • Joel S. Hellman

    (European Bank for Reconstruction and Development)

  • Geraint Jones

    (European Bank for Reconstruction and Development and World Bank)

  • Daniel Kaufmann

    (World Bank)

  • Mark Schankerman

    (European Bank for Reconstruction and Development and LSE)

Abstract

Recent studies have focused on the characteristics and policies of the state to explain the extent and causes of corruption, with little attention paid to the role played by firms. Consequently, the links between corporate governance and national governance have been unexplored. This paper summarises the results of the Business Environment and Enterprise Performance Survey (BEEPS) across 20 transition economies, providing an assessment of governance and corruption from the perspective of firms. The BEEPS is part of the global World Business Environment Survey being carried out by the World Bank. The survey design permits an in-depth empirical analysis of governance and corruption, unbundling governance into its component dimensions. This allows a more detailed quantitative assessment of corruption, a more nuanced understanding of the causes of the problem and as a result a stronger foundation for policy advice. Particular attention is paid to "state capture" by parts of the corporate sector (i.e. the propensity of firms to shape the underlying "rules of the game" including "purchase" of legislation and court decisions). The survey also provides measures of other dimensions of "grand corruption" such as that related to public procurement. Typically, crosscountry surveys suffer from a potential bias if firms have a tendency to systematically over- or underestimate the extent of problems in their own country. We implement a simple method for evaluating the extent of this "country perception bias" and find little evidence pointing to such bias in the BEEPS.

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Bibliographic Info

Paper provided by European Bank for Reconstruction and Development, Office of the Chief Economist in its series Working Papers with number 51.

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Length: 51 pages
Date of creation: Jun 2000
Date of revision:
Handle: RePEc:ebd:wpaper:51

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Related research

Keywords: Governance; corruption; state capture; transition economies;

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Citations

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Cited by:
  1. Clarke, George R.G., 2001. "Bridging the digital divide - how enterprise ownership and foreign competition affect Internet access in Eastern Europe and Central Asia," Policy Research Working Paper Series 2629, The World Bank.
  2. Wendy Carlin & Steven Fries & Mark Schaffer & Paul Seabright, 2001. "Competition and Enterprise Performance in Transition Economies from a Cross-Country Survey," CERT Discussion Papers 0101, Centre for Economic Reform and Transformation, Heriot Watt University.
  3. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2003. "Bank supervision and corporate finance," Policy Research Working Paper Series 3042, The World Bank.
  4. Sandra Blagojevic & Jože P.Damijan, 2012. "Impact of Private Incidence of Corruption and Firm Ownership on Performance of Firms in Central and Eastern Europe," LICOS Discussion Papers 31012, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  5. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2006. "Bank supervision and corruption in lending," Journal of Monetary Economics, Elsevier, vol. 53(8), pages 2131-2163, November.
  6. Carlin, Wendy & Fries, Steven & Schaffer, Mark E & Seabright, Paul, 2001. "Competition and Enterprise Performance in Transition Economies: Evidence from a Cross-country Survey," CEPR Discussion Papers 2840, C.E.P.R. Discussion Papers.
  7. Hellman, Joel S. & Jones, Geraint & Kaufmann, Daniel, 2003. "Seize the state, seize the day: state capture and influence in transition economies," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 751-773, December.
  8. Joel S. Hellman & Geraint Jones & Daniel Kaufmann, 2003. "Far From Home: Do Foreign Investors Import Higher Standards of Governance in Transition Economies?," Development and Comp Systems 0308006, EconWPA.
  9. John Boyd & Bruce Champ, 2003. "Inflation and financial market performance: what have we learned in the last ten years," Working Paper 0317, Federal Reserve Bank of Cleveland.
  10. Beck, T.H.L. & Demirgüc-Kunt, A. & Maksimovic, V., 2008. "Financing patterns around the world: Are small firms different?," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3132806, Tilburg University.
  11. Simon Johnson & John McMillan & Christopher Woodruff, 2002. "Property Rights and Finance," NBER Working Papers 8852, National Bureau of Economic Research, Inc.
  12. Steven Fries & Tatiana Lysenko & Saso Polanec, 2004. "Environnement des affaires et performance de l'entreprise dans les économies en transition : enseignements tirés d'une enquête représentative," Revue d’économie du développement, De Boeck Université, vol. 18(3), pages 155-195.
  13. Barth, James R. & Lin, Chen & Lin, Ping & Song, Frank M., 2009. "Corruption in bank lending to firms: Cross-country micro evidence on the beneficial role of competition and information sharing," Journal of Financial Economics, Elsevier, vol. 91(3), pages 361-388, March.
  14. Clarke, George R. G. & Cull, Robert & Martinez Peria, Maria Soledad, 2001. "Does foreign bank penetration reduce access to credit in developing countries"evidence from asking borrowers," Policy Research Working Paper Series 2716, The World Bank.
  15. Gelb, Alan & Ramachandran, Vijaya & Shah, Manju Kedia & Turner, Ginger, 2007. "What matters to African firms ? the relevance of perceptions data," Policy Research Working Paper Series 4446, The World Bank.
  16. Pasquale Tridico, 2006. "Institutional Change and Governance Indexes in Transition Economies: the case of Poland," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 3(2), pages 197-238, December.
  17. Fan, C. Simon & Lin, Chen & Treisman, Daniel, 2009. "Political decentralization and corruption: Evidence from around the world," Journal of Public Economics, Elsevier, vol. 93(1-2), pages 14-34, February.

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