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The Persistence of Corruption and Regulatory Compliance Failures

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  • Per G. Fredriksson
  • Muthukumara Mani
  • Richard Damania

Abstract

This paper examines the reasons why corruption and policy distortions tend to exhibit a high degree of persistence in certain regimes. We identify circumstances under which a firm seeks to evade regulations by (1) bribing of local inspectors, and (2) lobbying high-level government politicians to resist legal reforms designed to improve judicial efficiency and eliminate corruption. The analysis predicts that in politically unstable regimes, the institutions necessary to monitor and enforce compliance are weak. In such countries, corruption is more pervasive and the compliance with regulations is low. The empirical results support the predictions of the model.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 03/172.

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Length: 33
Date of creation: 01 Sep 2003
Date of revision:
Handle: RePEc:imf:imfwpa:03/172

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References

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  5. Vito Tanzi, 1998. "Corruption Around the World: Causes, Consequences, Scope, and Cures," IMF Staff Papers, Palgrave Macmillan, vol. 45(4), pages 559-594, December.
  6. Torsten Persson & Guido Tabellini & Francesco Trebbi, 2003. "Electoral Rules and Corruption," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 958-989, 06.
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  8. Stephen Morris & Stephen Coate, 1999. "Policy Persistence," American Economic Review, American Economic Association, vol. 89(5), pages 1327-1336, December.
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  18. Svensson, Jakob, 1998. "Investment, property rights and political instability: Theory and evidence," European Economic Review, Elsevier, vol. 42(7), pages 1317-1341, July.
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  20. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
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  22. Rasmusen, Eric & Ramseyer, J Mark, 1994. " Cheap Bribes and the Corruption Ban: A Coordination Game among Rational Legislators," Public Choice, Springer, vol. 78(3-4), pages 305-27, March.
  23. Laplante, Benoit & Rilstone, Paul, 1996. "Environmental Inspections and Emissions of the Pulp and Paper Industry in Quebec," Journal of Environmental Economics and Management, Elsevier, vol. 31(1), pages 19-36, July.
  24. Besley, Timothy & McLaren, John, 1993. "Taxes and Bribery: The Role of Wage Incentives," Economic Journal, Royal Economic Society, vol. 103(416), pages 119-41, January.
  25. Gray, Wayne B. & Deily, Mary E., 1996. "Compliance and Enforcement: Air Pollution Regulation in the U.S. Steel Industry," Journal of Environmental Economics and Management, Elsevier, vol. 31(1), pages 96-111, July.
  26. Mookherjee, Dilip & Png, I P L, 1995. "Corruptible Law Enforcers: How Should They Be Compensated?," Economic Journal, Royal Economic Society, vol. 105(428), pages 145-59, January.
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Citations

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Cited by:
  1. Chaudhry, Mumtaz Anwar & Shabbir, Ghulam, 2007. "Determinants of corruption in developing countries," HWWI Research Papers 2-11, Hamburg Institute of International Economics (HWWI).
  2. Udaibir S. Das & Marc Quintyn & Kina Chenard, 2004. "Does Regulatory Governance Matter for Financial System Stability? An Empirical Analysis," IMF Working Papers 04/89, International Monetary Fund.
  3. Langbein, Laura & Knack, Stephen, 2008. "The worldwide governance indicators and tautology : causally related separable concepts, indicators of a common cause, or both ?," Policy Research Working Paper Series 4669, The World Bank.
  4. Fredriksson, Per G. & Mani, Muthukumara & Wollscheid, Jim R., 2006. "Environmental federalism : a panacea or Pandora's box for developing countries?," Policy Research Working Paper Series 3847, The World Bank.

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