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Hold Your Nose and Vote: Why Do Some Democracies tolerate Corruption?

  • Marco Pani
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    This paper analyses why corruption can persist for long periods in a democracy and inquires whether this can result from a well-informed rational choice of the citizens. By applying a citizen-candidate model of representative democracy, the paper analyzes how corruption distortsthe allocation of resources between public and private expenditure, altering the policy preferences of elected and nonelected citizens in opposite directions. The result is a reduction in real public expenditure and, if the median voter''s demand for public goods is sufficiently elastic, a tax reduction. In this case, some citizens can indirectly benefit from corruption. The paper shows that, under this condition, if the citizens anticipate a shift in policy preferences in favor of higher public expenditure, they may support institutional arrangements that favor corruption (such as a weak enforcement of the law) in order to alter future policy decisions in their favor. This result complements the findings of other studies that have attributed the persistence of corruption in a democracyto some failure on the part of the voters or the electoral system. It also bears implications for developing effective anticorruption strategies and for redefining the role that can be played by the international community.

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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/83.

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    Length: 32
    Date of creation: 01 Apr 2009
    Date of revision:
    Handle: RePEc:imf:imfwpa:09/83
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    2. Dudley, L. & Montmarquette, C., 1986. "Bureaucratic Corruption As a Constraint on Voter Choice," Cahiers de recherche 8635, Universite de Montreal, Departement de sciences economiques.
    3. Osborne, Martin J & Slivinski, Al, 1996. "A Model of Political Competition with Citizen-Candidates," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 65-96, February.
    4. Myerson Roger B., 1993. "Effectiveness of Electoral Systems for Reducing Government Corruption: A Game-Theoretic Analysis," Games and Economic Behavior, Elsevier, vol. 5(1), pages 118-132, January.
    5. Mookherjee, Dilip & Png, I P L, 1995. "Corruptible Law Enforcers: How Should They Be Compensated?," Economic Journal, Royal Economic Society, vol. 105(428), pages 145-59, January.
    6. César Calderón & Alberto Chong, 2005. "Do Democracies Breed Rent-Seeking Behavior?," Research Department Publications 4415, Inter-American Development Bank, Research Department.
    7. Gary S. Becker, 1968. "Crime and Punishment: An Economic Approach," Journal of Political Economy, University of Chicago Press, vol. 76, pages 169.
    8. Tim Besley & Stephen Coate, . "An Economic Model of Representative Democracy," Penn CARESS Working Papers ecf70d639d700dba5327ab0c8, Penn Economics Department.
    9. Paldam, Martin, 2002. "The cross-country pattern of corruption: economics, culture and the seesaw dynamics," European Journal of Political Economy, Elsevier, vol. 18(2), pages 215-240, June.
    10. Besley, Timothy & McLaren, John, 1993. "Taxes and Bribery: The Role of Wage Incentives," Economic Journal, Royal Economic Society, vol. 103(416), pages 119-41, January.
    11. Torsten Persson & Guido Tabellini & Francesco Trebbi, 2003. "Electoral Rules and Corruption," Journal of the European Economic Association, MIT Press, vol. 1(4), pages 958-989, 06.
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    14. Hindriks, J. & Keen, M. & Muthoo, A., 1998. "Corruption, Extortion and Evasion," Discussion Papers 9809, Exeter University, Department of Economics.
    15. César Calderón & Alberto E. Chong, 2005. "Do Democracies Breed Rent-Seeking Behavior?," IDB Publications (Working Papers) 6695, Inter-American Development Bank.
    16. Basu, Kaushik & Bhattacharya, Sudipto & Mishra, Ajit, 1992. "Notes on bribery and the control of corruption," Journal of Public Economics, Elsevier, vol. 48(3), pages 349-359, August.
    17. Del Monte, Alfredo & Papagni, Erasmo, 2001. "Public expenditure, corruption, and economic growth: the case of Italy," European Journal of Political Economy, Elsevier, vol. 17(1), pages 1-16, March.
    18. Grossman, Gene M & Helpman, Elhanan, 1996. "Electoral Competition and Special Interest Politics," Review of Economic Studies, Wiley Blackwell, vol. 63(2), pages 265-86, April.
    19. Rose-Ackerman, Susan, 1975. "The economics of corruption," Journal of Public Economics, Elsevier, vol. 4(2), pages 187-203, February.
    20. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
    21. Treisman, Daniel, 2000. "The causes of corruption: a cross-national study," Journal of Public Economics, Elsevier, vol. 76(3), pages 399-457, June.
    22. Galeotti, Gianluigi & Merlo, Antonio, 1994. "Political Collusion and Corruption in a Representative Democracy," Public Finance = Finances publiques, , vol. 49(Supplemen), pages 232-43.
    23. Ades, Alberto & Di Tella, Rafael, 1997. "National Champions and Corruption: Some Unpleasant Interventionist Arithmetic," Economic Journal, Royal Economic Society, vol. 107(443), pages 1023-42, July.
    24. Robert Barro, 1973. "The control of politicians: An economic model," Public Choice, Springer, vol. 14(1), pages 19-42, March.
    25. Rob McGregor, 2007. "Federal Reserve transparency: The more things change, the more they stay the same?," Public Choice, Springer, vol. 133(3), pages 269-273, December.
    26. Mauro, Paolo, 1998. "Corruption and the composition of government expenditure," Journal of Public Economics, Elsevier, vol. 69(2), pages 263-279, June.
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