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Preferences,Development And The Corruption Trap

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  • Luca Correani

    (University of Tuscia - Viterbo)

Abstract

A perpetual scarcity of public goods/services produces distortions of an individual’s attitudes towards the cost of bureaucratic procedures: even if bureaucracy is not cumbersome, poverty induces people to perceive honesty as too expensive and to prefer illegal payments because they cannot completely satisfy their needs by following the legal bureaucratic procedures. So traditional anticorruption measures such as the increase in corruption costs or the organization of public education campaigns would not permanently reduce corruption levels if poverty remains diffused. Using an overlapping generation model based on a mechanism of cultural transmission, we study the evolution both of social attidudes towards bureaucratic corruption and the institutional framework. Theoretical analysis displays how in poorer countries corruption appears to be a permanent state; institutional reforms are blocked and the only relevant anticorruption intervention consists in public education campaigns. However, also in this case, we simply obtain a temporary reduction of corruption. We call this situation “the corruption trap” because the preferences of population always converge to equilibria with a very high proportion of corrupt agents and honesty is only a temporary state due to anticorruption measures. Similar situations could be observed in developed countries with high levels of corruption owing to unexpected institutional shoks. Finally, we empirically corroborate the model’s implications in a cross-country framework, using both corruption indices and a new data-set which measures the population’s expectation of future corruption for each country.

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Bibliographic Info

Paper provided by EconWPA in its series Public Economics with number 0406007.

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Length: 20 pages
Date of creation: 15 Jun 2004
Date of revision:
Handle: RePEc:wpa:wuwppe:0406007

Note: Type of Document - pdf; pages: 20
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Web page: http://128.118.178.162

Related research

Keywords: CORRUPTION; IMPERFECT EMPATHY; DEVELOPMENT;

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  1. de la Croix, David & Michel, Philippe, 1997. "Altruism and self-refrain," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1998010, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 00 Apr 1998.
  2. Erwin Tiongson & Hamid Reza Davoodi & Sanjeev Gupta, 2000. "Corruption and the Provision of Health Care and Education Services," IMF Working Papers 00/116, International Monetary Fund.
  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.
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  7. Esther Hauk & Maria Sáez, 1999. "On the cultural transmission of corruption," Economics Working Papers 392, Department of Economics and Business, Universitat Pompeu Fabra.
  8. Bisin, A. & Verdier, T., 1997. "The Economics of Cultural Transmission and the Dynamics of Preferences," DELTA Working Papers 97-03, DELTA (Ecole normale supérieure).
  9. Tirole, Jean, 1996. "A Theory of Collective Reputations (with Applications to the Persistence of Corruption and to Firm Quality)," Review of Economic Studies, Wiley Blackwell, vol. 63(1), pages 1-22, January.
  10. Sah, Raaj, 2007. "Corruption across countries and regions: Some consequences of local osmosis," Journal of Economic Dynamics and Control, Elsevier, vol. 31(8), pages 2573-2598, August.
  11. Andvig, J.C. & Ove Moene, K., 1988. "How Corruption May Corrupt," Memorandum 20/1988, Oslo University, Department of Economics.
  12. Vito Tanzi & Hamid Reza Davoodi, 1997. "Corruption, Public Investment, and Growth," IMF Working Papers 97/139, International Monetary Fund.
  13. Vito Tanzi, 1998. "Corruption Around the World: Causes, Consequences, Scope, and Cures," IMF Staff Papers, Palgrave Macmillan, vol. 45(4), pages 559-594, December.
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