IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

The Political Economy of Corruption and the Role of Financial Institutions

  • Boerner, Kira
  • Hainz, Christa

In many developing countries, we observe rather high levels of corruption. This is surprising from a political economy perspective, as the majority of people generally suffers from high corruption levels. We explain why citizens do not exert enough political pressure to reduce corruption if financial institutions are missing. Our model is based on the fact that corrupt officials have to pay entry fees to get lucrative positions. The mode of financing this entry fee determines the distribution of the rents from corruption. In a probabilistic voting model, we show that a lack of financial institutions can lead to more corruption as more voters are part of the corrupt system. Thus, the economic system has an effect on political outcomes. Well-functioning financial institutions, in turn, can increase the political support for anti-corruption measures.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: https://epub.ub.uni-muenchen.de/13416/1/135.pdf
Download Restriction: no

Paper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems with number 135.

as
in new window

Length:
Date of creation: Jun 2006
Date of revision:
Handle: RePEc:trf:wpaper:135
Contact details of provider: Postal:
Geschwister-Scholl-Platz 1, D-80539 Munich, Germany

Phone: +49-(0)89-2180-3405
Fax: +49-(0)89-2180-3510
Web page: http://www.sfbtr15.de/

More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. Djankov, Simeon & La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei, 2001. "The Regulation of Entry," Working Paper Series rwp01-015, Harvard University, John F. Kennedy School of Government.
  2. Torsten Persson & Guido Tabellini & Francesco Trebbi, . "Electoral Rules and Corruption," Working Papers 182, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  3. Torsten Persson & Guido Tabellini, . "Political Economics and Macroeconomic Policy," Working Papers 121, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  4. Marco Pagano & Paolo F. Volpin, 2005. "The Political Economy of Corporate Governance," American Economic Review, American Economic Association, vol. 95(4), pages 1005-1030, September.
  5. Mehnaz Safavian & Heywood Fleisig & Jevgenijs Steinbuks, 2006. "Unlocking Dead Capital," World Bank Other Operational Studies 11190, The World Bank.
  6. Daron Acemoglu, 1993. "Reward Structures and the Allocation of Talent," CEP Discussion Papers dp0143, Centre for Economic Performance, LSE.
  7. Torsten Persson & Gérard Roland & Guido Tabellini, 1997. "Separation of Powers and Political Accountability," The Quarterly Journal of Economics, Oxford University Press, vol. 112(4), pages 1163-1202.
  8. Rafael LaPorta & Florencio Lopez de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Harvard Institute of Economic Research Working Papers 1788, Harvard - Institute of Economic Research.
  9. Acemoglu, Daron & Verdier, Thierry, 1998. "Property Rights, Corruption and the Allocation of Talent: A General Equilibrium Approach," Economic Journal, Royal Economic Society, vol. 108(450), pages 1381-1403, September.
  10. 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.
  11. Paolo Mauro, 1995. "Corruption and Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 681-712.
  12. Reto Foellmi & Manuel Oechslin, . "Who Gains From Non-Collusive Corruption?," IEW - Working Papers 142, Institute for Empirical Research in Economics - University of Zurich.
  13. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
  14. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1990. "The Allocation of Talent: Implications for Growth," NBER Working Papers 3530, National Bureau of Economic Research, Inc.
  15. Torsten Persson & Guido Tabellini, 2002. "Political Economics: Explaining Economic Policy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262661314, March.
  16. Rafael LaPorta & Florencio Lopez de-Silanes & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," Harvard Institute of Economic Research Working Papers 1768, Harvard - Institute of Economic Research.
    • Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," NBER Working Papers 5661, National Bureau of Economic Research, Inc.
    • Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, . "Law and Finance," Working Paper 19451, Harvard University OpenScholar.
    • La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert W., 1998. "Law and Finance," Scholarly Articles 3451310, Harvard University Department of Economics.
  17. repec:cup:cbooks:9780521632935 is not listed on IDEAS
  18. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 2000. "Investor protection and corporate governance," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 3-27.
  19. Lui, Francis T, 1985. "An Equilibrium Queuing Model of Bribery," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 760-81, August.
  20. Bac, Mehmet, 1996. "Corruption and Supervision Costs in Hierarchies," Journal of Comparative Economics, Elsevier, vol. 22(2), pages 99-118, April.
  21. Murphy, Kevin M & Shleifer, Andrei & Vishny, Robert W, 1993. "Why Is Rent-Seeking So Costly to Growth?," American Economic Review, American Economic Association, vol. 83(2), pages 409-14, May.
  22. Assar Lindbeck & Jörgen Weibull, 1987. "Balanced-budget redistribution as the outcome of political competition," Public Choice, Springer, vol. 52(3), pages 273-297, January.
  23. Karla Hoff & Joseph E. Stiglitz, 2004. "After the Big Bang? Obstacles to the Emergence of the Rule of Law in Post-Communist Societies," American Economic Review, American Economic Association, vol. 94(3), pages 753-763, June.
  24. Coate, Stephen & Morris, Stephen, 1995. "On the Form of Transfers in Special Interests," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1210-35, December.
  25. Roger B. Myerson, 1991. "Effectiveness of Electoral Systems for Reducing Government Corruption: A Game-Theoretic Analysis," Discussion Papers 956, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  26. repec:cup:cbooks:9780521659123 is not listed on IDEAS
  27. 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.
  28. Thierry Verdier & Daron Acemoglu, 2000. "The Choice between Market Failures and Corruption," American Economic Review, American Economic Association, vol. 90(1), pages 194-211, March.
  29. Treisman, Daniel, 2000. "The causes of corruption: a cross-national study," Journal of Public Economics, Elsevier, vol. 76(3), pages 399-457, June.
  30. Ritva Reinikka & Jakob Svensson, 2004. "Local Capture: Evidence from a Central Government Transfer Program in Uganda," The Quarterly Journal of Economics, Oxford University Press, vol. 119(2), pages 679-705.
  31. Toke S. Aidt, 2003. "Economic analysis of corruption: a survey," Economic Journal, Royal Economic Society, vol. 113(491), pages F632-F652, November.
  32. 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.
  33. Beck, Paul J. & Maher, Michael W., 1986. "A comparison of bribery and bidding in thin markets," Economics Letters, Elsevier, vol. 20(1), pages 1-5.
  34. 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.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:trf:wpaper:135. 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: (Tamilla Benkelberg)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.