Seeds of corruption - Do market institutions matter?
AbstractTen years into the transition, corruption is so pervasive that it could jeopardize the best-intentioned reform efforts. The authors present an analytical framework for examining the role market institutions play in rent-seeking and illicit behavior. Using recently available data on the incidence of corruption, and on institutional development, they provide preliminary evidence on the link between the development of market institutions, and incentives for corruption. Virtually all of the indicators they examine appear to be important, but three are statistically significant: 1) the intensity of barriers to the entry of new business. 2) The effectiveness of the legal system. 3) The efficacy and competitiveness of services provided by infrastructure monopolies. The main lesson emerging from their analysis: a well established system of market institutions - clear and transparent rules, fully functioning checks and balances (including strong enforcement mechanisms), and a robust competitive environment - reduces opportunities for rent-seeking and hence incentives for corruption. Both the design, and effective implementation of such measures are important if a market system is to be effective. It is not enough, for example, to enact first-rate laws if they are not enforced. The local political economy greatly affects whether a given policy reform will curtail corruption. Especially important are the following factors in the political economy: a) the credibility of the government's commitment to carrying out announced reforms. B) The degree to which government officials are captured by the entities they regulate or oversee. C) the stability of the government itself. D) The political power of entrenched vested interests. Economists in the field of industrial organization, antitrust, and regulation have long recognized these factors as potent determinants of opportunistic behavior, corruption, and"capture"of government officials. Only now are they becoming conventional wisdom among specialists in economies in transition.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 2368.
Date of creation: 30 Jun 2000
Date of revision:
Decentralization; International Terrorism&Counterterrorism; Economic Theory&Research; Environmental Economics&Policies; Legal Products; Governance Indicators; Legal Products; National Governance; Economic Theory&Research; Environmental Economics&Policies;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 1999.
"Corporate Ownership Around the World,"
Journal of Finance,
American Finance Association, vol. 54(2), pages 471-517, 04.
- Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer, 1998. "Corporate Ownership Around the World," NBER Working Papers 6625, National Bureau of Economic Research, Inc.
- Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 1998. "Corporate Ownership Around the World," Harvard Institute of Economic Research Working Papers 1840, Harvard - Institute of Economic Research.
- Gatti, Roberta, 1999. "Corruption and trade tariffs, or a case for uniform tariffs," Policy Research Working Paper Series 2216, The World Bank.
- Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 110(3), pages 681-712, August.
- Kaufmann, Daniel & Kraay, Aart & Zoido-Lobaton, Pablo, 1999. "Governance matters," Policy Research Working Paper Series 2196, The World Bank.
- Brunetti, Aymo & Kisunko, Gregory & Weder, Beatrice, 1997. "Institutions in transition : reliability of rules and economic performance in former Socialist countries," Policy Research Working Paper Series 1809, The World Bank.
- Fleming, Alex & Lily Chu & Bakker, Marie-Renee, 1996. "The Baltics - Banking crises observed," Policy Research Working Paper Series 1647, The World Bank.
- Rafael Di Tella & Alberto Ades, 1999. "Rents, Competition, and Corruption," American Economic Review, American Economic Association, vol. 89(4), pages 982-993, September.
- Daniele, Vittorio & Marani, Ugo, 2011. "Organized crime, the quality of local institutions and FDI in Italy: A panel data analysis," European Journal of Political Economy, Elsevier, vol. 27(1), pages 132-142, March.
- Iwasaki, Ichiro & Suzuki, Taku, 2012.
"The determinants of corruption in transition economies,"
Elsevier, vol. 114(1), pages 54-60.
- Iwasaki, Ichiro & Suzuki, Taku, 2010. "The Determinants of Corruption in Transition Economies," Discussion Paper Series, Institute of Economic Research, Hitotsubashi University a533, Institute of Economic Research, Hitotsubashi University.
- 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.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).
If references are entirely missing, you can add them using this form.