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Corruption, Rule of Law, and Economic Efficiency: Virginia vs. Chicago Public Choice Theories

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  • Ladislava Grochova

    () (Department of Economics, FBE MENDELU in Brno)

  • Tomas Otahal

    () (Department of Economics, FBE MENDELU in Brno)

Abstract

Can corruption improve economic efficiency? Classical political economists argue that corruption undermines the rule of law (Smith, 2001, chap. 5). The modern Public Choice proponents argue that corruption and lobbying might influence the efficiency of the rule of law. While Chicago Public Choice scholars model how legal lobbying, which is corruption in V irginia Public Choice perspective, improves efficiency of the rule of law and thus the overall economic efficiency, the Virginia Public Choice models explain how corruption reduces efficiency of the rule of law and thus the overall economic efficiency. In this short paper, we present a brief survey distinguishing between arguments of the Chicago Public Choice and Virginia Public Choice schools on how corruption influences economic efficiency. We argue that the Virginia Public Choice explanation is more realistic because it includes the influence of bureaucratic rent-seeking.

Suggested Citation

  • Ladislava Grochova & Tomas Otahal, 2012. "Corruption, Rule of Law, and Economic Efficiency: Virginia vs. Chicago Public Choice Theories," ACTA VSFS, University of Finance and Administration, vol. 6(2), pages 136-154.
  • Handle: RePEc:prf:journl:v:6:y:2012:i:2:p:136-154
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    Keywords

    bureaucracy; corruption; economic efficiency; Chicago Public Choice; lobbying; Virginia Public Choice; rent-seeking; rule of law;

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • P3 - Economic Systems - - Socialist Institutions and Their Transitions

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