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Why is Corruption Less Harmful in Some Countries Than in Others?

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  • Keith Blackburn
  • Gonzalo F. Forgues-Puccio

Abstract

Empirical evidence shows that not all countries with high levels of corruption have su¤ered poor growth performance. Bad quality governance has clearly been much less damaging (if at all) in some economies than in others. Why this is so is a question that has largely been ignored, and the intention of this paper is to provide an answer. We develop a dynamic general equilibrium model in which growth occurs endogenously through the invention of new goods based on research and development activity. For such activity to be undertaken, ?rms must acquire complementary licenses from public officials who are able to exploit their monopoly power by demanding bribes in exchange for these (otherwise free) permits. We show that the effects of corruption depend on the extent to which bureaucrats coordinate their rent-seeking behaviour. Speci?cally, our analysis predicts that countries with organised corruption networks are likely to display lower levels of bribes, higher levels of research activity and higher rates of growth than countries with disorganised corruption arrangements..

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Bibliographic Info

Paper provided by Economics, The Univeristy of Manchester in its series Centre for Growth and Business Cycle Research Discussion Paper Series with number 88.

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Length: 25 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:man:cgbcrp:88

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Citations

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Cited by:
  1. Maria Cristina Molinari, 2011. "Corruption in Privatization and Governance Regimes," Working Papers 201_28, Department of Economics, University of Venice "Ca' Foscari".
  2. Gonzalo F. Forgues-Puccio & Ibrahim M. Okumu, 2012. "Does Size Matter? Scale, Corruption and Uncertainty," CDMA Working Paper Series 201207, Centre for Dynamic Macroeconomic Analysis.
  3. Pál Csapodi & István Takács & Katalin György-Takács, 2011. "Corruption as a Deviant Social Attitude," Public Finance Quarterly, State Audit Office of Hungary, vol. 56(1), pages 27-43.
  4. Schumacher, Ingmar, 2013. "Political stability, corruption and trust in politicians," Economic Modelling, Elsevier, vol. 31(C), pages 359-369.
  5. Carlyn Dobson & Antonio Rodríguez, 2010. "Is Corruption Really Bad for Inequality? Evidence from Latin America," Development Research Working Paper Series 02/2010, Institute for Advanced Development Studies.
  6. Keith Blackburn & Gonzalo F. Forgues-Puccio, 2005. "Financial Liberalisation, Bureaucratic Corruption and Economic Devlopment," The School of Economics Discussion Paper Series 0531, Economics, The University of Manchester.
  7. Dobson, Stephen & Ramlogan-Dobson, Carlyn, 2012. "Why is Corruption Less Harmful to Income Inequality in Latin America?," World Development, Elsevier, vol. 40(8), pages 1534-1545.
  8. Dimant, Eugen, 2013. "The nature of corruption: An interdisciplinary perspective," Economics Discussion Papers 2013-59, Kiel Institute for the World Economy.
  9. Xiaobing Wang, 2009. "Regulation and Corruption in Transitional China," The School of Economics Discussion Paper Series 0920, Economics, The University of Manchester.
  10. Kuloglu, Ayhan & Lobont, Oana-Ramona & Topcu, Mert, 2012. "A question of causality between political corruption, economic freedom and economic growth in Europe," MPRA Paper 40365, University Library of Munich, Germany.
  11. Wang, Yuanyuan & You, Jing, 2012. "Corruption and firm growth: Evidence from China," China Economic Review, Elsevier, vol. 23(2), pages 415-433.
  12. Dzhumashev, Ratbek, 2014. "Corruption and growth: The role of governance, public spending, and economic development," Economic Modelling, Elsevier, vol. 37(C), pages 202-215.

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