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Democracy, rule of law, corruption incentives, and growth

Author

Listed:
  • de la CROIX, David
  • DELAVALLADE, Clara

Abstract

We bridge the gap between the standard theory of growth and the mostly static theory of corruption. Some public investment can be diverted from its purpose by corrupt individuals. Voters determine the level of public investment subject to an incentive constraint equalizing the returns from productive and corrupt activities. We concentrate on two exogenous institutional parameters: the "technology of corruption" is the ease with which rent-seekers can capture a proportion of public spending. The "concentration of political power" is the extent to which rent-seekers have more political influence than other people. One theoretical prediction is that the effects of the two institutional parameters on income growth and equilibrium corruption are different according to the constraints that are binding at equilibrium. In particular, the effect of judicial quality on growth should be stronger when political power is concentrated. We estimate a system of equations where both corruption and income growth are determined simultaneously and show that income growth is more affected by our proxies for legal and political institutions in countries where political rights and judicial institutions respectively are limited.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • de la CROIX, David & DELAVALLADE, Clara, 2011. "Democracy, rule of law, corruption incentives, and growth," LIDAM Reprints CORE 2347, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:2347
    DOI: 10.1111/j.1467-9779.2011.01497.x
    Note: In : Journal of Public Economic Theory, 13(2), 155-187, 2011
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    Cited by:

    1. Larissa Batrancea & Anca Nichita & Ioan Batrancea & Lucian Gaban, 2018. "The Strenght of the Relationship Between Shadow Economy and Corruption: Evidence from a Worldwide Country-Sample," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 138(3), pages 1119-1143, August.
    2. Wensheng Xiao & Yu Tang & Bright Obuobi & Shaojian Qu & Minglan Yuan & Decai Tang, 2023. "The Influence of Rule of Law on Government’s Sustainable Economic Management: Evidence from China," Sustainability, MDPI, vol. 15(15), pages 1-23, July.
    3. Pierre Pecher, 2018. "Ethnic divisions and the effect of appropriative competition intensity on economic performance," Economics of Governance, Springer, vol. 19(2), pages 165-193, May.
    4. Feng, Jie & Gao, Junhong, 2023. "Natural resource curse hypothesis and governance: Understanding the role of rule of law and political risk in the context of China," Resources Policy, Elsevier, vol. 85(PB).
    5. Mohamed Ben Mimoun & Asma Raies, 2022. "Is social spending pro‐poor in developing countries? The role of governance and political freedom," Poverty & Public Policy, John Wiley & Sons, vol. 14(3), pages 214-241, September.
    6. Leonardo A. Lanzona Jr., 2019. "Agrarian Reform and Democracy: Lessons from the Philippine Experience," Millennial Asia, , vol. 10(3), pages 272-298, December.
    7. repec:prg:jnlpep:v:preprint:id:647:p:1-19 is not listed on IDEAS
    8. Tamara Fioroni & Andrea Mario Lavezzi & Giovanni Trovato, 2025. "Organized Crime, Corruption, and Economic Growth," Journal of Regional Science, Wiley Blackwell, vol. 65(2), pages 535-560, March.
    9. David Croix & Clara Delavallade, 2009. "Growth, public investment and corruption with failing institutions," Economics of Governance, Springer, vol. 10(3), pages 187-219, July.
    10. Panagiotis Arsenis & Dimitrios Varvarigos, 2011. "Corruption, Fertility, and Human Capital," Discussion Papers in Economics 11/28, Division of Economics, School of Business, University of Leicester, revised Apr 2011.
    11. Mohamed Ben Mimoun, 2013. "Assessing the Short- and Long-run Real Effects of Public External Debt: The Case of Tunisia," African Development Review, African Development Bank, vol. 25(4), pages 587-606.
    12. Kumara, Ajantha Sisira & Handapangoda, Wasana Sampath, 2014. "Political environment a ground for public sector corruption? Evidence from a cross-country analysis," MPRA Paper 54721, University Library of Munich, Germany, revised 22 Mar 2014.
    13. Omar A. Guerrero & Gonzalo Castañeda, 2021. "Does expenditure in public governance guarantee less corruption? Non-linearities and complementarities of the rule of law," Economics of Governance, Springer, vol. 22(2), pages 139-164, June.
    14. Qamar Abbas & Li Junqing & Muhammad Ramzan & Sumbal Fatima, 2021. "Role of Governance in Debt-Growth Relationship: Evidence from Panel Data Estimations," Sustainability, MDPI, vol. 13(11), pages 1-19, May.
    15. Marek Tomaszewski, 2018. "Corruption - A Dark Side of Entrepreneurship. Corruption and Innovations," Prague Economic Papers, Prague University of Economics and Business, vol. 2018(3), pages 251-269.
    16. Omar A. Guerrero & Gonzalo Casta~neda, 2019. "Does Better Governance Guarantee Less Corruption? Evidence of Loss in Effectiveness of the Rule of Law," Papers 1902.00428, arXiv.org.
    17. Maiga Nouhoun Oumarou & Sirpe Gnanderman, 2023. "Optimal size of public expenditure in the countries of the West African Economic and Monetary Union (WAEMU)," Economics Bulletin, AccessEcon, vol. 43(1), pages 146-160.

    More about this item

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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