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The Political Economy of Corruption: A Philippine Illustrationa

Author

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  • James Roumasset

    (Department of Economics, University of Hawaii at Manoa
    University of Hawaii Economic Research Organization)

Abstract

This essay explores the nature, causes, and consequences of corruption as it pertains to entire regimes. Grand corruption is modeled as a type of unproductive rent-seeking at the highest levels of government. The economic costs of corruption are assumed to increase in the decentralization (and relaxation) of its governance, increase convexly in the percentage extracted, and decreasing in the opportunities for productive rent-seeking. Combining these assumptions with the benefits of corruption yields the results that optimal corruption revenues are increasing in greed of the regime and in economic opportunities but that the economic costs of corruption may be highest in the least avaricious regime. The theory is illustrated with a stylized account of corruption in three Philippine administrations, from 1973-1998. Policy implications are discussed, including the role of the economist in making corruption less attractive.

Suggested Citation

  • James Roumasset, 2008. "The Political Economy of Corruption: A Philippine Illustrationa," Working Papers 200805, University of Hawaii at Manoa, Department of Economics.
  • Handle: RePEc:hai:wpaper:200805
    as

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    File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_08-5.pdf
    File Function: First version, 2008
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    References listed on IDEAS

    as
    1. Brunetti, Aymo & Weder, Beatrice, 2003. "A free press is bad news for corruption," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1801-1824, August.
    2. John McLaren, 1996. "Corruption, Black Markets, and the Fiscal Problem in LDCs: Some Recent Findings," Eastern Economic Journal, Eastern Economic Association, vol. 22(4), pages 491-502, Fall.
    3. Naci Mocan, 2008. "What Determines Corruption? International Evidence From Microdata," Economic Inquiry, Western Economic Association International, vol. 46(4), pages 493-510, October.
    4. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
    5. Mc Laren, J, 1996. "Corruption, Black Markets, and the Fiscal Problem in LDC's : Some Recent Findings," Papers 763, Yale - Economic Growth Center.
    6. James A. Roumasset, 1996. "Review of Vos and Yap's The Philippine Economy: East Asia's Stray Cat?," Working Papers 199615, University of Hawaii at Manoa, Department of Economics.
    7. Rafael Di Tella & Alberto Ades, 1999. "Rents, Competition, and Corruption," American Economic Review, American Economic Association, vol. 89(4), pages 982-993, September.
    8. Graeff, P. & Mehlkop, G., 2003. "The impact of economic freedom on corruption: different patterns for rich and poor countries," European Journal of Political Economy, Elsevier, vol. 19(3), pages 605-620, September.
    9. Van Rijckeghem, Caroline & Weder, Beatrice, 2001. "Bureaucratic corruption and the rate of temptation: do wages in the civil service affect corruption, and by how much?," Journal of Development Economics, Elsevier, vol. 65(2), pages 307-331, August.
    10. Roumasset, James A. & Clarete, Ramon L., 1983. "An Analysis of Economic Policies Affecting the Philippine Coconut Industry," Working Papers WP 1983-08, Philippine Institute for Development Studies.
    11. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 681-712.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Corruption; Philippines; kleptocracy;

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies

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