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Microeconomics of Corruption Among Developing Economies

  • James P. Gander
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    A simple micro model of a firm’s investment decision made under the uncertainty of the success of a bribe of a government official is developed. The probability of success of the bribe is a function of the amount paid to the official to “get things done.” The operational model runs the amount of the bribe on such determinants as firm size, country size, shareholder ownership, political instability, and court system. The data covers the periods 2002-2005 and 2006-2010, includes 150 developing countries and has data on some 72,000 firms. Several econometric estimation methods were used. The findings support earlier studies, to wit, firm size and country size are inversely related to the index of corruption. Political instability and the court system were positively related to corruption. Policy implications of the findings are discussed.

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    File URL: http://economics.utah.edu/research/publications/2011_01.pdf
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    Paper provided by University of Utah, Department of Economics in its series Working Paper Series, Department of Economics, University of Utah with number 2011_01.

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    Length: 18 pages
    Date of creation: 2011
    Date of revision:
    Handle: RePEc:uta:papers:2011_01
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    Web page: http://economics.utah.edu

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    1. Reinikka, Ritva & Svensson, Jakob, 2006. "Using Micro-Surveys to Measure and Explain Corruption," World Development, Elsevier, vol. 34(2), pages 359-370, February.
    2. Fisman, Raymond & Gatti, Roberta, 2000. "Decentralization and corruption - evidence across countries," Policy Research Working Paper Series 2290, The World Bank.
    3. Pierre-Guillaume Méon & Laurent Weill, 2010. "Is corruption an efficient grease?," ULB Institutional Repository 2013/92603, ULB -- Universite Libre de Bruxelles.
    4. Menezes, Flavio Marques, 2000. "The Microeconomics of Corruption: The Classical Approach," Economics Working Papers (Ensaios Economicos da EPGE) 405, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
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