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

  • 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)

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.

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File URL: http://econwpa.repec.org/eps/dev/papers/0308/0308004.pdf
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Paper provided by EconWPA in its series Development and Comp Systems with number 0308004.

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Length: 47 pages
Date of creation: 27 Aug 2003
Date of revision:
Handle: RePEc:wpa:wuwpdc:0308004
Note: Type of Document - Acrobat PDF; pages: 47
Contact details of provider: Web page: http://econwpa.repec.org

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  1. Daniel Kaufmann & Shang-Jin Wei, 2000. "Does 'Grease Money' Speed Up the Wheels of Commerce?," IMF Working Papers 00/64, International Monetary Fund.
  2. 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.
  3. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
  4. Kaufmann, Daniel & Kraay, Aart & Zoido-Lobaton, Pablo, 1999. "Aggregating governance indicators," Policy Research Working Paper Series 2195, The World Bank.
  5. Kaufman, Daniel & Shang-Jin Wei, 1999. "Does"grease money"speed up the wheels of commerce?," Policy Research Working Paper Series 2254, The World Bank.
  6. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
  7. Gorochowskij, Bogdan & Kaufmann, Daniel & Marin, Dalia, 2000. "Barter In Transition Economies: Competing Explanations Confront Ukrainian Data," CEPR Discussion Papers 2432, C.E.P.R. Discussion Papers.
  8. J. Stiglitz, 1999. "Whither Reform? Ten Years of the Transition," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 7.
  9. 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.
  10. Shang-Jin Wei, 1999. "Corruption in economic development - beneficial grease, minor annoyance, or major obstacle?," Policy Research Working Paper Series 2048, The World Bank.
  11. Selowsky, Marcelo & Martin, Ricardo, 1997. "Policy Performance and Output Growth in the Transition Economies," American Economic Review, American Economic Association, vol. 87(2), pages 349-53, May.
  12. Sachs, Jeffrey D, 1996. "The Transition at Mid Decade," American Economic Review, American Economic Association, vol. 86(2), pages 128-33, May.
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