Ades, Alberto and Rafael Di Tella, 1997, “National Champions and Corruption: Some Unpleasant Interventionist Arithmetic,” The Economic Journal, 107 (July) pp. 1023-1042.
Bardhan, Pranad, 1997, “Corruption and Development: A Review of Issues,” Journal of Economic Literature, Vol. XXXV (September), pp. 1320-1346.
Baumol, William J., 1990, “Entrepreneurship: Productive, Unproductive, and Destructive,” Journal of Political Economy, Vol. 98 (October) pp. 893-921.
Beck, Paul J. and Michael W. Maker, 1986, “A Comparison of Bribery and Bidding in Thin Markets,” Economic Letters, Vol. 20, pp. 1-5.
Becker, Gary S., 1968, “Crime and Punishment: An Economic Approach,” Journal of Political Economy, 76 (2) (March/April), pp. 169-217.
Becker, Gary S. and George J. Stigler, 1974, “Law Enforcement, Malfeasance, and Compensation for Employees,” Journal of Legal Studies (January) pp. 1-18.
Braguinsky, Serguey, 1996, “Corruption and Schumpeterian Growth in Different Economic Environments,” Contemporary Economic Policy, Vol. XIV (July) pp. 14-25.
Chand, Sheetal K. and Karl O. Moene, 1997, “Controlling Fiscal Corruption,” IMF Working Paper 97/100 (Washington: International Monetary Fund).
Ferrero, Mario and Giorgio Brosio, 1997, “Nomenklatura Rule under Democracy: Solving the Italian Political Puzzle,” Journal of Theoretical Politics, Volume 9, No. 4 (October).
Galasi, P. an G. Gertesi, 1987, “The Spread of Bribery in a Centrally Planned Economy,” in Acta Aeconomica, Vol. 34 (3-4), pp. 371-389.
Galtung, Frederik, 1997, “Developing Agencies of Restraint in A Climate of Systemic Corruption: The National Integrity System at Work,” paper presented at the Third Vienna Dialogue on Democracy, June 26-27, 1997 (Vienna).
Grossman, Gregory, 1982, “The Second Economy in the USSR,” in The Underground Economy in the United States and Abroad, edited by Vito Tanzi (Lexington: D.C. Heath and Company), pp. 245-270.
Gupta, Sanjeev, Hamid Davoodi, Rosa Alonso-Terme, “Does Corruption Affect Income Inequality and Poverty?” IMF Working Paper, forthcoming (Washington: International Monetary Fund).
Hines, James R., 1995, “Forbidden Payments: Foreign Bribery and American Business After 1977,” Working Paper 5266, National Bureau of Economy Research, Inc. (September).
Johnson, Simon, Daniel Kaufmann, and Andrei Shleifer, 1997, “The Unofficial Economy in Transition,” in Brookings Papers on Economic Activity, 2, pp. 159-239.
Johnston, Michael, 1997, “Public Officials, Private Interests, and Sustainable Democracy: When Politics and Corruption Meet,” in Kimberly Ann Elliot, editor, Corruption and the Global Economy, (Washington: Institute for International Economics) pp. 61-82.
Kaufmann, Daniel, 1997, “The Missing Pillar of a Growth Strategy for Ukraine,” in Ukraine: Accelerating the Transition to Market, edited by P. Cornelius and P. Lemain (Washington: International Monetary Fund).
Kaufmann, Daniel and Paul Siegelbaum, 1996 “Privatization and Corruption in Transition Economies,” Journal of International Affairs, Vol. 50, No. 2, (Winter) pp. 419-458.
Klimo, Arpad von, 1997, “Fra Stato Centralistico e Periferia. Alti Funzionari Statali in Italia e nella Germania Prussiana dal 1870 al 1914,” in Oliver Janz and Pierangelo Schiero, editors, Centralismo e Federalismo nel XIX e XX Secolo, Un Confronto tra la Germania e Italia (Bologna: Il Mulino).
- Search Google Scholar
- Export Citation
)| false Klimo, Arpad von, 1997, “ Fra Stato Centralistico e Periferia. Alti Funzionari Statali in Italia e nella Germania Prussiana dal 1870 al 1914,” in Oliver Janzand Pierangelo Schiero, editors, Centralismo e Federalismo nel XIX e XX Secolo, Un Confronto tra la Germania e Italia( Bologna: Il Mulino).
Kopits, George, and Jon Craig, 1998, “Transparency in Government Operations,” IMF Occasional Paper, No. 158 (Washington: International Monetary Fund).
Langseth, Peter and Rick Stapenhurst, 1997, “National Integrity System: Country Studies,” Economic Development Institute of the World Bank, EDI Working Papers (Washington: The World Bank).
Manzetti, Luigi and Charles Blake, 1997, “Market Reforms and Corruption in Latin America: New Means for Old Ways,” Review of International Political Economy.
Mauro, Paolo, 1997, “The Effects of Corruption on Growth, Investment, and Government Expenditure: A Cross-Country Analysis,” in Kimberly Ann Elliott, editor, Corruption in the Global Economy, (Washington: Institute for International Economics).
Murphy, Kevin M., Andrei Shleifer, and Robert W. Vishny, 1991, “The Allocation of Talent: Implication for Growth,” Quarterly Journal of Economics, 106, (May) p. 503-30.
Rose-Ackerman, Susan, 1997, “Corruption and Development,” paper presented at the Annual Bank Conference on Development Economies.
Ruzindana, Augustine, 1997, “The Importance of Leadership in Fighting Corruption in Uganda,” in Kimberly Ann Elliott, editor, Corruption in the Global Economy (Washington: Institute for International Economics), pp. 133-146.
Tanzi, Vito, 1995a, “Corruption, Arm’s-Length Relationships, and Markets,” in The Economics of Organised Crime, edited by Gianluca Fiorentini and Sam Peltzman (Cambridge: Cambridge University Press), pp. 161-180.
Tanzi, Vito, 1995b, “Government Role and the Efficiency of Policy Instruments,” IMF Working Paper 95/100 (Washington: International Monetary Fund). Forthcoming in a book, edited by Peter Sorensen, to be published by MacMillan Press.
Tanzi, Vito and Hamid Davoodi, 1997, “Corruption, Public Investment, and Growth,” IMF Working Paper 97/139 (Washington: International Monetary Fund).
Tanzi, Vito and Ludger Schuknecht, 1997, “Reconsidering the Fiscal Role of Government: The International Perspective,” The American Economic Review, Vol. 87, No. 2 (May) p. 164-168.
Ul Haque, Nadeem and Ratna Sahay, 1996, “Do Government Wages Cuts Close Budget Deficits? Costs of Corruption,” Staff Papers, International Monetary Fund Vol. 43 (December) pp. 754-778.
van Tulden, Frank and Abraham van der Torre, 1997, “Crime and the Criminal Justice System: An Economic Approach.” Paper presented at the 53rd Congress of the International Institute of Public Finance, August 1997, Kyoto, Japan.
van Rijckeghem and Beatrice Weder, “Corruption and the Rate of Temptation: Do Low Wages in the Civil Service Cause Corruption?” IMF Working Paper WP/97/73.
An earlier draft of this paper was written while the author was spending a short sabbatical at Collegium Budapest, Institute for Advanced Study (Budapest). It was presented as the Fellow Lecture at the Institute on November 10, 1997 and at a conference on “Corruption: A Threat to Democracy” at the Headquarters of Interpol, Lyons (France) on December 7, 1997.
The views expressed in this paper are strictly personal and do not necessarily reflect official views of the International Monetary Fund. I wish to thank Hamid Davoodi and Shing-Jin Wei for their comments.
See Noonan, Jr., (1984) for a very interesting historical overview of corruption in different societies.
An attempt by the author of this paper to create a corruption index on the basis of newspaper stories reported by the Internet, indicated that for some countries these Internet entries amount to tens of thousands.
See, for example, the remarks by (then) Secretary of Commerce, Michael Kantor, to the Detroit Economic Club (July 25, 1996) in which he stated that since 1994 American companies had lost international contracts worth $45 billion because of bribes paid by foreign contractors to the officials of foreign countries. See also Hines, Jr. (1995).
These norms of behavior may be different between countries and are likely to change only slowly over time.
This has actually happened in some countries in particular areas such as the customs administration.
Reported in Galtung (1987).
See Nordio (1997). Carlo Nordio was one of the leading judges in the Italian fight against political corruption.
A more neutral definition is that corruption is the intentional noncompliance with arm’s length relationship aimed at deriving some advantage from this behavior for oneself or for related individuals. See Tanzi (1995a). For other definitions, see Theobald (1990).
For example, when a taxi driver charges you more than the regulated price.
It becomes difficult to draw a distinction between some forms of rent seeking and corruption.
In practice, those who give gifts may expect some form of payment for them. For example, we expect love or good behavior from our children when we give them gifts; but the recipients of the gifts do not have an obligation to reciprocate.
The state can exercise its role through various instruments. Some of these lend themselves more easily to acts of corruption. See Tanzi (1995). For an empirical analysis that links market structure and rents to the level of corruption, see Ades and Di Tella (forthcoming).
Some economists have argued that this kind of corruption can be eliminated by setting up several offices all authorized to provide the authorizations or permits. This would remove the monopoly power from the bureaucrats. See Shleifer and Vishny (1993). Unfortunately, the setting up of several offices may be costly. In some cases, particular activities (say yearly inspections of cars) can be privatized.
In cases of political corruption, those who represent the state (president, prime minister, ministers) or their close relatives may use the tax and customs administrations to pursue rent seeking and corrupt practices.
There have even been reports that in some countries these jobs can be bought.
The notorious US$600 hammers bought by the Pentagon could be explained in terms of the application of these procedures.
Because of the variation of the price of commodities even within a day, it may be difficult to ascertain at which price a transaction takes place. Some of the difference between the actual price and the declared price may be channeled into foreign accounts.
In some countries these incentive have been provided outside the normal legal process, by high level public officials, to favored individuals.
One of the leading judges of mani pulite (clean hands), the investigation in the Italian corruption scandal, has recently described the arrangements among the parties to share the proceeds from corruption. See Nordio (1997). On the issue of political corruption, see also Cazzola (1988); Johnston (1997); and Ferrero and Brosio (1997).
See von Klimo (1997). Von Klimo compares the public conception of an inefficient and corrupt public administration in 19th century Italy with the “myth of absolute efficiency and incorruptibility” enjoyed by the administration of the Prussian state.
In some countries, public sector hiring has had the main objective of reducing unemployment rather than improving the quality of the public administration.
In Peru, the wage structure in the tax administration became similar to that of the Central Bank and thus somewhat higher than the wage structure of the civil service. Also, an incentive system was introduced which assigned to the tax administration (SUNAT) a share of the tax revenue. The average age of the employees of the tax administration was dramatically reduced.
A common belief is that in situations of low wages but high possibilities of corruption, less
honest individuals will be attracted to the civil service.
For an econometric application of Becker’s theory to the Netherlands, see Frank van Tulden and Abraham van der Torre (1997).
China has recently gone as far as applying the death penalty on some individuals accused of corruption. However, some acts of corruption may still go unpunished so that uncertainty prevails on the treatment of individuals accused of corruption. This may lead to the perception that penalties are applied selectively or arbitrarily.
Even in countries with relatively little corruption, so-called “whistle blowers” do not seem to have an easy time.
Reluctance to apply harsh penalties may also be due to concerns that the penalties might be applied selectively, to political opponents.
For the experience of Uganda in the fight against corruption, see Ruzindana (1997); and Langseth and Stapenhurst (1997). As Table 1 below shows, Uganda is still perceived as a country with a high level of corruption.
One could measure acts of corruption on bribes paid.
For some countries, the Internet reports tens of thousands of entries to the subject of corruption.
Even today a few economists still argue that, within well confined circumstances, corruption may promote faster growth. See, for example, Braguinsky (1996).
Since the fall of 1997, some journalistic accounts have blamed corruption for both the enormous fires that burned large areas of the Indonesian forests and for the currency crises caused by unproductive investments and high short-term borrowing.
For a quantitative analysis that establishes a connection between higher corruption on one hand and higher income inequality and poverty on the other hand, see Gupta, Davoodi, and Alonso-Terme (1998).
Furthermore random corruption may also be accompanied by higher penalties if the act of corruption is discovered.
These small, economic activities may be preyed upon by the police, health inspectors, tax inspectors, and by myriads of other individuals presumably representing the government.
Of course, this does not mean that there is no corruption in the provision of these services. The provision of health is often distorted by bribes to doctors or other medical personnel to get better or faster service.
In practice, of course, these marginal costs and marginal benefits are impossible to measure.
Of course, we are ignoring the cases when corruption is coercive and reflects the pressures of public officials or individuals.
They may be approximated only in a few countries such as Denmark, Sweden, New Zealand, Canada and perhaps a few others.
This is particularly the case of tax officials in some countries with decentralized fiscal systems. In these situations, the officials may be subject to conflicting pressures from the national government and the local governments.
For a discussion of quasi-fiscal regulations and their power to replace taxing and spending, see Tanzi (1995b).
This has been a major issue in economies in transition where governments want to continue to directly influence the activities in some sectors. Thus the policymakers have found it hard to accept the approach associated with broad based taxes.
It should be remembered that many dictators or many potential dictators make the fight against corruption one of the reasons why they should be given the reigns of a country. Some associate democracy with lack of discipline.