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Removing impediments to sustainable economic development : the case of corruption

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  • Lopez Claros, Augusto
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    Abstract

    This paper examines causes and consequences of corruption within the process of economic development. It starts by reviewing some of the factors that, over the past couple of decades, have transformed corruption from a subject on the sidelines of economic research to a central preoccupation of policy makers and donors in many countries. Drawing on a vast treasure trove of experiences and insights accumulated during the postwar period and reflected in a growing body of academic research, the paper analyzes many of the institutional mechanisms that sustain corruption and the impact of corruption on development. This paper argues that many forms of corruption stem from the distributional attributes of the state in its role as the economy's central agent of resource allocation. What is the impact of corruption on public finances and on the characteristics and performance of the private sector? What distortions does corruption introduce in the allocation of resources and in the relationships among economic agents in the marketplace? The paper also addresses the question of what can be done about corruption and discusses the role of economic policies in developing the right sorts of incentives and institutions to reduce the incidence of corruption. Particular attention is paid to business regulation, subsidies, the budget process, international conventions, and the role of new technologies. The paper concludes with some thoughts on the moral dimensions of corruption.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6704.

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    Date of creation: 01 Nov 2013
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    Handle: RePEc:wbk:wbrwps:6704

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    Keywords: Public Sector Corruption&Anticorruption Measures; Access to Finance; Corruption&Anticorruption Law; Bankruptcy and Resolution of Financial Distress; Debt Markets;

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    1. Clausen, Bianca & Kraay, Aart & Nyiri, Zsolt, 2009. "Corruption and confidence in public institutions : evidence from a global survey," Policy Research Working Paper Series 5157, The World Bank.
    2. Shang-Jin Wei, 1997. "How Taxing is Corruption on International Investors?," William Davidson Institute Working Papers Series 63, William Davidson Institute at the University of Michigan.
    3. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
    4. Dollar, David & Alesina, Alberto, 2000. "Who Gives Foreign Aid to Whom and Why?," Scholarly Articles 4553020, Harvard University Department of Economics.
    5. Gordon Tullock, 1996. "Corruption Theory And Practice," Contemporary Economic Policy, Western Economic Association International, vol. 14(3), pages 6-13, 07.
    6. Bhattacharyya, Sambit & Hodler, Roland, 2010. "Natural resources, democracy and corruption," European Economic Review, Elsevier, Elsevier, vol. 54(4), pages 608-621, May.
    7. Vito Tanzi, 1998. "Corruption Around the World: Causes, Consequences, Scope, and Cures," IMF Staff Papers, Palgrave Macmillan, vol. 45(4), pages 559-594, December.
    8. Axel Dreher & Martin Gassebner, 2013. "Greasing the wheels? The impact of regulations and corruption on firm entry," Public Choice, Springer, Springer, vol. 155(3), pages 413-432, June.
    9. Jeanet Sinding Bentzen, 2012. "How Bad is Corruption? Cross‐country Evidence of the Impact of Corruption on Economic Prosperity," Review of Development Economics, Wiley Blackwell, Wiley Blackwell, vol. 16(1), pages 167-184, 02.
    10. Banfield, Edward C, 1975. "Corruption as a Feature of Governmental Organization," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 18(3), pages 587-605, December.
    11. James R. Hines, Jr., 1995. "Forbidden Payment: Foreign Bribery and American Business After 1977," NBER Working Papers 5266, National Bureau of Economic Research, Inc.
    12. Kornai, Janos, 1992. "The Socialist System: The Political Economy of Communism," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198287766, October.
    13. Fan, C. Simon & Lin, Chen & Treisman, Daniel, 2009. "Political decentralization and corruption: Evidence from around the world," Journal of Public Economics, Elsevier, Elsevier, vol. 93(1-2), pages 14-34, February.
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