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Preferences,Development And The Corruption Trap

Author

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  • Luca Correani

    (University of Tuscia - Viterbo)

Abstract

A perpetual scarcity of public goods/services produces distortions of an individual’s attitudes towards the cost of bureaucratic procedures: even if bureaucracy is not cumbersome, poverty induces people to perceive honesty as too expensive and to prefer illegal payments because they cannot completely satisfy their needs by following the legal bureaucratic procedures. So traditional anticorruption measures such as the increase in corruption costs or the organization of public education campaigns would not permanently reduce corruption levels if poverty remains diffused. Using an overlapping generation model based on a mechanism of cultural transmission, we study the evolution both of social attidudes towards bureaucratic corruption and the institutional framework. Theoretical analysis displays how in poorer countries corruption appears to be a permanent state; institutional reforms are blocked and the only relevant anticorruption intervention consists in public education campaigns. However, also in this case, we simply obtain a temporary reduction of corruption. We call this situation “the corruption trap” because the preferences of population always converge to equilibria with a very high proportion of corrupt agents and honesty is only a temporary state due to anticorruption measures. Similar situations could be observed in developed countries with high levels of corruption owing to unexpected institutional shoks. Finally, we empirically corroborate the model’s implications in a cross-country framework, using both corruption indices and a new data-set which measures the population’s expectation of future corruption for each country.

Suggested Citation

  • Luca Correani, 2004. "Preferences,Development And The Corruption Trap," Public Economics 0406007, EconWPA.
  • Handle: RePEc:wpa:wuwppe:0406007
    Note: Type of Document - pdf; pages: 20
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    References listed on IDEAS

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    1. Sah, Raaj, 2007. "Corruption across countries and regions: Some consequences of local osmosis," Journal of Economic Dynamics and Control, Elsevier, vol. 31(8), pages 2573-2598, August.
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    4. Vito Tanzi & Hamid R Davoodi, 1997. "Corruption, Public Investment, and Growth," IMF Working Papers 97/139, International Monetary Fund.
    5. Bisin, Alberto & Verdier, Thierry, 2001. "Agents with imperfect empathy may survive natural selection," Economics Letters, Elsevier, vol. 71(2), pages 277-285, May.
    6. Hauk, Esther & Saez-Marti, Maria, 2002. "On the Cultural Transmission of Corruption," Journal of Economic Theory, Elsevier, vol. 107(2), pages 311-335, December.
    7. Andvig, Jens Chr. & Moene, Karl Ove, 1990. "How corruption may corrupt," Journal of Economic Behavior & Organization, Elsevier, vol. 13(1), pages 63-76, January.
    8. Bisin, Alberto & Verdier, Thierry, 2001. "The Economics of Cultural Transmission and the Dynamics of Preferences," Journal of Economic Theory, Elsevier, vol. 97(2), pages 298-319, April.
    9. Erwin H Tiongson & Hamid R Davoodi & Sanjeev Gupta, 2000. "Corruption and the Provision of Health Care and Education Services," IMF Working Papers 00/116, International Monetary Fund.
    10. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
    11. Bisin, Alberto & Verdier, Thierry, 1998. "On the cultural transmission of preferences for social status," Journal of Public Economics, Elsevier, vol. 70(1), pages 75-97, October.
    12. Vito Tanzi, 1998. "Corruption Around the World: Causes, Consequences, Scope, and Cures," IMF Staff Papers, Palgrave Macmillan, vol. 45(4), pages 559-594, December.
    13. repec:adr:anecst:y:2001:i:63-64:p:12 is not listed on IDEAS
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    More about this item

    Keywords

    CORRUPTION; IMPERFECT EMPATHY; DEVELOPMENT;

    JEL classification:

    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior

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