IDEAS home Printed from https://ideas.repec.org/p/zbw/cegedp/9.html
   My bibliography  Save this paper

How corruption in government affects public welfare: A review of theory

Author

Listed:
  • Lambsdorff, Johann

Abstract

The objectives of government are pivotal to understanding the diverse negative effects of corruption on public welfare. Corruption renders governments unable or unwilling to maximize welfare. In the first case, it distorts agents' decisions and limits the contractual space available to agents and the government, acting as a benevolent principal. In the second case, a corrupt principal creates allocative inefficiencies, cripples its credible commitment to effective policies, and opens the door to opportunism.

Suggested Citation

  • Lambsdorff, Johann, 2001. "How corruption in government affects public welfare: A review of theory," University of Göttingen Working Papers in Economics 9, University of Goettingen, Department of Economics.
    • Handle: RePEc:zbw:cegedp:9
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/32018/1/500238685.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Martin C. McGuire & Mancur Olson, 1998. "The Economics of Autocracy and Majority Rule: The Invisible Hand and the Use of Force," International Economic Association Series, in: Silvio Borner & Martin Paldam (ed.), The Political Dimension of Economic Growth, chapter 3, pages 38-73, Palgrave Macmillan.
    2. Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2002. "The Regulation of Entry," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(1), pages 1-37.
    3. Jonathan Isham & Daniel Kaufmann, 1999. "The Forgotten Rationale for Policy Reform: The Productivity of Investment Projects," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(1), pages 149-184.
    4. Roland Strausz, 1997. "Collusion and Renegotiation in a Principal–Supervisor–Agent Relationship," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(4), pages 497-518, December.
    5. 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.
    6. Hart, Albert G, 1970. "Fiscal Policy in Latin America," Journal of Political Economy, University of Chicago Press, vol. 78(4), pages 857-889, Part II J.
    7. Orchard, Lionel & Stretton, Hugh, 1997. "Public Choice," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 21(3), pages 409-430, May.
    8. 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.
    9. Button, Kenneth J & Weyman-Jones, Thomas G, 1994. "X-Efficiency and Technical Efficiency," Public Choice, Springer, vol. 80(1-2), pages 83-104, July.
    10. Olsen, Trond E & Torsvik, Gaute, 1998. "Collusion and Renegotiation in Hierarchies: A Case of Beneficial Corruption," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 413-438, May.
    11. Buchanan, James M, 1993. "Public Choice after Socialism," Public Choice, Springer, vol. 77(1), pages 67-74, September.
    12. Landes, William M & Posner, Richard A, 1975. "The Independent Judiciary in an Interest-Group Perspective," Journal of Law and Economics, University of Chicago Press, vol. 18(3), pages 875-901, December.
    13. 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 409-414, May.
    14. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, December.
    15. Leibenstein, Harvey, 1973. "Competition and X-Efficiency: Reply," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 765-777, May-June.
    16. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
    17. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
    18. Charles Rowley & Anne Rathbone, 2013. "The political economy of antitrust," Chapters, in: Manfred Neumann & Jürgen Weigand (ed.), The International Handbook of Competition – Second Edition, chapter 6, pages 169-206, Edward Elgar Publishing.
    19. Niskanen, William A, 1975. "Bureaucrats and Politicians," Journal of Law and Economics, University of Chicago Press, vol. 18(3), pages 617-643, December.
    20. Theodore Morgan, 1964. "The Theory of Error in Centrally-Directed Economic Systems," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 78(3), pages 395-419.
    21. Lui, Francis T, 1985. "An Equilibrium Queuing Model of Bribery," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 760-781, August.
    22. Mauro, Paolo, 1998. "Corruption and the composition of government expenditure," Journal of Public Economics, Elsevier, vol. 69(2), pages 263-279, June.
    23. Stigler, George J, 1976. "The Xistence of X-Efficiency," American Economic Review, American Economic Association, vol. 66(1), pages 213-216, March.
    24. Khalil, Fahad & Lawarree, Jacques, 1995. "Collusive Auditors," American Economic Review, American Economic Association, vol. 85(2), pages 442-446, May.
    25. Besley, Timothy & McLaren, John, 1993. "Taxes and Bribery: The Role of Wage Incentives," Economic Journal, Royal Economic Society, vol. 103(416), pages 119-141, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Németh, Erzsébet & Martus, Bettina & Vargha, Bálint Tamás, 2018. "Integrity Risks and Controls of Public Services," Public Finance Quarterly, Corvinus University of Budapest, vol. 63(2), pages 155-175.
    2. Khan, Anupriya & Krishnan, Satish, 2019. "Conceptualizing the impact of corruption in national institutions and national stakeholder service systems on e-government maturity," International Journal of Information Management, Elsevier, vol. 46(C), pages 23-36.
    3. Adam, Ibrahim Osman, 2020. "Examining E-Government development effects on corruption in Africa: The mediating effects of ICT development and institutional quality," Technology in Society, Elsevier, vol. 61(C).
    4. PREDA Ionut - Cristian, 2023. "Corruption Impact On Healthcare Systems During The Covid-19 Pandemic," Revista Economica, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 75(1), pages 50-65, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Aidt, Toke & Jayasri Dutta, 2002. "Policy compromises: corruption and regulation in a dynamic democracy," Royal Economic Society Annual Conference 2002 1, Royal Economic Society.
    2. Bernard Gauthier & Jonathan Goyette, 2016. "Fiscal policy and corruption," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 46(1), pages 57-79, January.
    3. Börner, Kira & Hainz, Christa, 2004. "The Political Economy of Corruption and the Role of Financial Institutions," Discussion Papers in Economics 411, University of Munich, Department of Economics.
    4. Hainz, Christa & Boerner, Kira, 2005. "The Political Economy of Corruption and and the Role of Financial Institutions," Proceedings of the German Development Economics Conference, Kiel 2005 6, Verein für Socialpolitik, Research Committee Development Economics.
    5. Cooter, Robert & Garoupa, Nuno, 2000. "The Virtuous Circle of Distrust: A Mechanism to Deter Bribes and Other Cooperative Crimes," Berkeley Olin Program in Law & Economics, Working Paper Series qt83c0k3wc, Berkeley Olin Program in Law & Economics.
    6. Toke S. Aidt, 2009. "Corruption, institutions, and economic development," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 25(2), pages 271-291, Summer.
    7. Osipian, Ararat, 2008. "The World is Flat: Modeling Educators’ Misconduct with Cellular Automata," MPRA Paper 7592, University Library of Munich, Germany.
    8. Farida, Moe & Ahmadi-Esfahani, Fredoun Z., 2008. "Corruption and economic growth in Lebanon," 2008 Conference (52nd), February 5-8, 2008, Canberra, Australia 6043, Australian Agricultural and Resource Economics Society.
    9. Blackburn, Keith & Forgues-Puccio, Gonzalo F., 2009. "Why is corruption less harmful in some countries than in others?," Journal of Economic Behavior & Organization, Elsevier, vol. 72(3), pages 797-810, December.
    10. Blackburn, Keith & Forgues-Puccio, Gonzalo F., 2007. "Distribution and development in a model of misgovernance," European Economic Review, Elsevier, vol. 51(6), pages 1534-1563, August.
    11. Aidt, T. & Dutta, J. & Vania Sena, 2005. "Growth, Governance and Corruption in the Presence of Threshold Effects: Theory and Evidence," Cambridge Working Papers in Economics 0540, Faculty of Economics, University of Cambridge.
    12. Keith Blackburn & Niloy Bosey & Salvatore Capasso, 2008. "Living With Corruption: Threshold Effects in Red Tape and Rent Seeking," Working Papers 4_2008, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
    13. Alexander Henke & Fahad Khalil & Jacques Lawarree, 2022. "Honest agents in a corrupt equilibrium," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(3), pages 762-783, August.
    14. Shuanglin Lin & Wei Zhang, 2009. "The effect of corruption on capital accumulation," Journal of Economics, Springer, vol. 97(1), pages 67-93, May.
    15. Toke S. Aidt, 2016. "Rent seeking and the economics of corruption," Constitutional Political Economy, Springer, vol. 27(2), pages 142-157, June.
    16. Cooter Robert D. & Garoupa Nuno, 2014. "A Disruption Mechanism for Bribes," Review of Law & Economics, De Gruyter, vol. 10(3), pages 1-23, November.
    17. Kira Boerner & Christa Hainz, 2007. "The Political Economy of Corruption & the Role of Financial Institutions," William Davidson Institute Working Papers Series wp892, William Davidson Institute at the University of Michigan.
    18. Jakob Svensson, 2006. "Osiem pytań na temat korupcji," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 9, pages 77-106.
    19. De Rosa Donato & Gooroochurn Nishaal & Görg Holger, 2015. "Corruption and Productivity: Firm-level Evidence," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 235(2), pages 115-138, April.
    20. De Rosa, Donato & Gooroochurn, Nishaal & Gorg, Holger, 2010. "Corruption and productivity : firm-level evidence from the BEEPS survey," Policy Research Working Paper Series 5348, The World Bank.

    More about this item

    Keywords

    Corruption; welfare; principal-agent-theory; rent-seeking; x-inefficiency; kleptocracy; opportunism;
    All these keywords.

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:cegedp:9. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/cdgoede.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.