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The Persistence of Corruption and Slow Economic Growth

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  • Paolo Mauro

Abstract

There is increasing recognition that corruption has substantial, adverse effects on economic growth. But if the costs of corruption are so high, why don’t countries strive to improve their institutions and root out corruption? Why do many countries appear to be stuck in a vicious circle of widespread corruption and low economic growth, often accompanied by ever-changing governments through revolutions and coups? A possible explanation is that when corruption is widespread, individuals do not have incentives to fight it even if everybody would be better off without it. Two models involving strategic complementarities and multiple equilibria attempt to illustrate this formally.

Suggested Citation

  • Paolo Mauro, 2002. "The Persistence of Corruption and Slow Economic Growth," IMF Working Papers 02/213, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:02/213
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    References listed on IDEAS

    as
    1. Sah, Raaj K, 1991. "Social Osmosis and Patterns of Crime," Journal of Political Economy, University of Chicago Press, vol. 99(6), pages 1272-1295, December.
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    6. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
    7. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1991. "The Allocation of Talent: Implications for Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 503-530.
    8. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    9. Cadot, Olivier, 1987. "Corruption as a gamble," Journal of Public Economics, Elsevier, vol. 33(2), pages 223-244, July.
    10. Huang, Peter H & Wu, Ho-Mou, 1994. "More Order without More Law: A Theory of Social Norms and Organizational Cultures," Journal of Law, Economics, and Organization, Oxford University Press, vol. 10(2), pages 390-406, October.
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    More about this item

    Keywords

    Corruption; multiple equilibria; strategic complementarities; persistence; bribe; expenditure; government expenditure; bribes; grand corruption; Illegal Behavior and the Enforcement of Law;

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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