Corruption and the Composition of Public Expenditures: Evidence from OECD Countries
This paper analyzes how corruption affects the composition of public expenditures. First, a two-stage rent-seeking model with endogenous rent-setting is derived that captures both "political corruption" and "bureaucratic corruption". The model illustrates how asymmetries between industries in the degree of competition and in the difficulty of concealing bribery may influence the allocation of public spending. The theoretical implications are tested with a panel dataset for 26 OECD countries over the 1996 - 2008 period. The results suggest that the shares of spending on health and environmental protection increase, while the shares of spending on social protection and recreation, culture and religion decline with higher levels of corruption. The significance of these distortions is robust to a variety of specifications such as fixed effects, random effects, seemingly unrelated regressions, the inclusion of additional controls, and the use of alternative corruption indicators.
|Date of creation:||26 Sep 2010|
|Date of revision:|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- van Dalen, Hendrik P & Swank, Otto H, 1996.
"Government Spending Cycles: Ideological or Opportunistic?,"
Springer, vol. 89(1-2), pages 183-200, October.
- Hendrik Dalen & Otto Swank, 1996. "Government spending cycles: Ideological or opportunistic?," Public Choice, Springer, vol. 89(1), pages 183-200, October.
- Lorenzo Pellegrini & Reyer Gerlagh, 2004. "Corruption's Effect on Growth and its Transmission Channels," Kyklos, Wiley Blackwell, vol. 57(3), pages 429-456, 08.
- Devereux, Michael P & Lockwood, Ben & Redoano, Michela, 2002.
"Do Countries Compete Over Corporate Tax Rates?,"
The Warwick Economics Research Paper Series (TWERPS)
642, University of Warwick, Department of Economics.
- Nitzan, Shmuel, 1991. "Collective Rent Dissipation," Economic Journal, Royal Economic Society, vol. 101(409), pages 1522-34, November.
- Katz, Eliakim & Tokatlidu, Julia, 1996. "Group competition for rents," European Journal of Political Economy, Elsevier, vol. 12(4), pages 599-607, December.
- 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.
- Stein, William E, 2002. "Asymmetric Rent-Seeking with More Than Two Contestants," Public Choice, Springer, vol. 113(3-4), pages 325-36, December.
- Günther G. Schulze & Björn Frank, 2003.
"Deterrence versus intrinsic motivation: Experimental evidence on the determinants of corruptibility,"
Economics of Governance,
Springer, vol. 4(2), pages 143-160, 08.
- Bjorn Frank & Guenther G. Schulze, 2000. "Deterrence versus Intrinsic Motivation: Experimental Evidence on the Determinants of Corruptibility," Econometric Society World Congress 2000 Contributed Papers 0950, Econometric Society.
- Schulze, Günther G. & Frank, Björn, 2000. "Deterrence versus intrinsic motivation: Experimental evidence on the determinants of corruptility," Discussion Papers, Series I 303, University of Konstanz, Department of Economics.
- Hillman, Arye L. & Katz, Eliakim, 1987. "Hierarchical structure and the social costs of bribes and transfers," Journal of Public Economics, Elsevier, vol. 34(2), pages 129-142, November.
- Jong-A-Pin, Richard, 2009.
"On the measurement of political instability and its impact on economic growth,"
European Journal of Political Economy,
Elsevier, vol. 25(1), pages 15-29, March.
- Jong-A-Pin, R., 2006. "On the measurement of political instability and its impact on economic growth," Research Report 06C05, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
- Pierre-Guillaume Méon & Khalid Sekkat, 2005.
"Does corruption grease or sand the wheels of growth?,"
ULB Institutional Repository
2013/7364, ULB -- Universite Libre de Bruxelles.
- Pierre-Guillaume Méon & Khalid Sekkat, 2005. "Does corruption grease or sand the wheels of growth?," Public Choice, Springer, vol. 122(1), pages 69-97, January.
- Neal D. Woods, 2008. "The Policy Consequences of Political Corruption: Evidence from State Environmental Programs," Social Science Quarterly, Southwestern Social Science Association, vol. 89(1), pages 258-271.
- Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
- Mauro, Paolo, 1998. "Corruption and the composition of government expenditure," Journal of Public Economics, Elsevier, vol. 69(2), pages 263-279, June.
- William D. Nordhaus, 1975. "The Political Business Cycle," Review of Economic Studies, Oxford University Press, vol. 42(2), pages 169-190.
- Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 681-712.
- Fredriksson, Per G. & Svensson, Jakob, 2003. "Political instability, corruption and policy formation: the case of environmental policy," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1383-1405, August.
- Appelbaum, Elie & Katz, Eliakim, 1987. "Seeking Rents by Setting Rents: The Political Economy of Rent Seeking," Economic Journal, Royal Economic Society, vol. 97(387), pages 685-99, September.
- Lambsdorff, Johann Graf, 2002. "Corruption and Rent-Seeking," Public Choice, Springer, vol. 113(1-2), pages 97-125, October.
- Clara Delavallade, 2006. "Corruption and distribution of public spending in developing countries," Journal of Economics and Finance, Springer, vol. 30(2), pages 222-239, June.
- Rose-Ackerman, Susan, 1975. "The economics of corruption," Journal of Public Economics, Elsevier, vol. 4(2), pages 187-203, February.
- Mo, Pak Hung, 2001. "Corruption and Economic Growth," Journal of Comparative Economics, Elsevier, vol. 29(1), pages 66-79, March.
- Beck, Thorsten & Clarke, George & Groff, Alberto & Keefer, Philip & Walsh, Patrick, 2000. "New tools and new tests in comparative political economy - the database of political institutions," Policy Research Working Paper Series 2283, The World Bank.
- Silvana Robone & Alberto Zanardi, 2006. "Market structure and technology: evidence from the Italian National Health Service," International Journal of Health Care Finance and Economics, Springer, vol. 6(3), pages 215-236, September.
- Hillman, Arye L., 2004. "Corruption and public finance: an IMF perspective," European Journal of Political Economy, Elsevier, vol. 20(4), pages 1067-1077, November.
- Gupta, Sanjeev & de Mello, Luiz & Sharan, Raju, 2001. "Corruption and military spending," European Journal of Political Economy, Elsevier, vol. 17(4), pages 749-777, November.
- Roberto Ricciuti, 2004. "Political Fragmentation and Fiscal Outcomes," Public Choice, Springer, vol. 118(3_4), pages 365-388, 03.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:25945. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.