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Microeconomics of Corruption Among Developing Economies

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  • James P. Gander

Abstract

A simple micro model of a firms investment decision made under the uncertainty of the success of a bribe of a government official is developed. The probability of success of the bribe is a function of the amount paid to the official to get things done. The operational model runs the amount of the bribe on such determinants as firm size, country size, shareholder ownership, political instability, and court system. The data covers the periods 2002-2005 and 2006-2010, includes 150 developing countries and has data on some 72,000 firms. Several econometric estimation methods were used. The findings support earlier studies, to wit, firm size and country size are inversely related to the index of corruption. Political instability and the court system were positively related to corruption. Policy implications of the findings are discussed.

Suggested Citation

  • James P. Gander, 2011. "Microeconomics of Corruption Among Developing Economies," Working Paper Series, Department of Economics, University of Utah 2011_01, University of Utah, Department of Economics.
    • Handle: RePEc:uta:papers:2011_01
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    References listed on IDEAS

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    1. Menezes, Flavio Marques, 2000. "The microeconomics of corruption: the classical approach," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 405, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
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    3. Fisman, Raymond & Gatti, Roberta, 2002. "Decentralization and corruption: evidence across countries," Journal of Public Economics, Elsevier, vol. 83(3), pages 325-345, March.
    4. Méon, Pierre-Guillaume & Weill, Laurent, 2010. "Is Corruption an Efficient Grease?," World Development, Elsevier, vol. 38(3), pages 244-259, March.
    5. Gary S. Becker & George J. Stigler, 1974. "Law Enforcement, Malfeasance, and Compensation of Enforcers," The Journal of Legal Studies, University of Chicago Press, vol. 3(1), pages 1-18, January.
    6. Gander, James P., 2007. "The micro-macro policy game under uncertainty and risk attitude," Journal of Economics and Business, Elsevier, vol. 59(1), pages 1-13.
    7. Rose-Ackerman, Susan, 1975. "The economics of corruption," Journal of Public Economics, Elsevier, vol. 4(2), pages 187-203, February.
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    Cited by:

    1. Luminiţa Ionescu & George Lăzăroiu & Gheorghe Iosif, 2012. "Corruption and bureaucracy in public services," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 14(Special N), pages 665-679, November.

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    Keywords

    Firm; Corruption; Uncertainty; Developing Countries. JEL Classification:;
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