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Measuring Governance, Corruption and State Capture: How Firms and Bureaucrats Shape the Business Environment in Transition Economies

Author

Listed:
  • Joel S. Hellman

    (The World Bank)

  • Geraint Jones

    (MIT)

  • Daniel Kaufmann

    (The World Bank)

  • Mark Schankerman

    (London School of Economics; Centre for Economic Policy Research)

Abstract

Recent studies have focussed on the characteristics and policies of the state to explain the extent and causes of corruption, with little attention paid to the role played by firms. Consequently, the links between corporate governance and national governance have been unexplored. This paper summarises the results of the Business Environment and Enterprise Performance Survey (BEEPS) across 20 transition economies, providing an assessment of governance and corruption from the perspective of firms. The BEEPS is part of the global World Business Environment Survey being carried out by the World Bank. The survey design permits an in-depth empirical analysis of governance and corruption, unbundling governance into its component dimensions. This allows a more detailed quantitative assessment of corruption, a more nuanced understanding of the causes of the problem and as a result a stronger foundation for policy advice. Particular attention is paid to 'state capture' by parts of the corporate sector (i.e. the propensity of firms to shape the underlying 'rules of the game' including 'purchase' of legislation and court decisions). The survey also provides measures of other dimensions of 'grand corruption', such as that related to public procurement. Typically, cross-country surveys suffer from a potential bias if firms have a tendency to systematically over- or under-estimate the extent of problems in their own country. We implement a simple method for evaluating the extent of this 'country perception bias' and find little evidence pointing to such bias in the BEEPS.

Suggested Citation

  • Joel S. Hellman & Geraint Jones & Daniel Kaufmann & Mark Schankerman, 2003. "Measuring Governance, Corruption and State Capture: How Firms and Bureaucrats Shape the Business Environment in Transition Economies," Development and Comp Systems 0308004, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpdc:0308004
    Note: Type of Document - Acrobat PDF; pages: 47
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    References listed on IDEAS

    as
    1. Simon Johnson & Daniel Kaufman & Andrei Shleifer, 1997. "The Unofficial Economy in Transition," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(2), pages 159-240.
    2. Dalia Marin & Daniel Kaufmann & Bogdan Gorochowskij, 2000. "Barter in Transition Economies: Competing Explanations Confront Ukranian Data," William Davidson Institute Working Papers Series 287, William Davidson Institute at the University of Michigan.
    3. Kaufman, Daniel & Shang-Jin Wei, 1999. "Does"grease money"speed up the wheels of commerce?," Policy Research Working Paper Series 2254, The World Bank.
    4. Sachs, Jeffrey D, 1996. "The Transition at Mid Decade," American Economic Review, American Economic Association, vol. 86(2), pages 128-133, May.
    5. Dilip Mookherjee & Pranab K. Bardhan, 2000. "Capture and Governance at Local and National Levels," American Economic Review, American Economic Association, vol. 90(2), pages 135-139, May.
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    7. Shang-Jin Wei, 1999. "Corruption in economic development - beneficial grease, minor annoyance, or major obstacle?," Policy Research Working Paper Series 2048, The World Bank.
    8. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
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    More about this item

    Keywords

    Governance; corruption; state capture; transition economies;
    All these keywords.

    JEL classification:

    • C42 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Survey Methods
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • P5 - Economic Systems - - Comparative Economic Systems
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics
    • H4 - Public Economics - - Publicly Provided Goods
    • K2 - Law and Economics - - Regulation and Business Law

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