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

Author

Listed:
  • 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.

Suggested Citation

  • Joel S. Hellman & Geraint Jones & Daniel Kaufmann & Mark Schankerman, 2000. "Measuring governance and state capture: the role of bureaucrats and firms in shaping the business environment," Working Papers 51, European Bank for Reconstruction and Development, Office of the Chief Economist.
  • Handle: RePEc:ebd:wpaper:51
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    Citations

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    Cited by:

    1. Nikolay Nenovsky & E. Peev & T. Yalamov, 2003. "Banks-Firms Nexus under the Currency Board: Empirical Evidence from Bulgaria," Post-Print halshs-00259830, HAL.
    2. Abdelbagi Edrees Saied & Mofidh Mohamed Awad-Allah, 2020. "The Impact Of Corruption On Financial Development In Africa," Noble International Journal of Economics and Financial Research, Noble Academic Publsiher, vol. 5(2), pages 32-39, February.
    3. Irina Slinko & Ekaterina Zhuravskaya & Evgeny Yakovlev, 2005. "Laws for Sale: Evidence from Russia," American Law and Economics Review, American Law and Economics Association, vol. 7(1), pages 284-318.
    4. John E. Anderson, 2005. "Fiscal Reform and its Firm-Level Effects in Eastern Europe and Central Asia," William Davidson Institute Working Papers Series wp800, William Davidson Institute at the University of Michigan.

    More about this item

    Keywords

    Governance; corruption; state capture; transition economies;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • P26 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Property Rights

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