Academic journal article
By Buscaglia, Edgardo; Dakolias, Maria
Law and Policy in International Business
Inefficiency in weak public institutions and systemic corruption have led to the deterioration of the quality of service delivered by government agencies.(1) Because corruption has been an intrinsic part of the way the state has operated in many countries, it will be impossible to remodel the state if corruption persists. Therefore, fighting corruption is central to the process of reinvigorating the state. Failure to confront corruption will obstruct reform initiatives and countries will continue to pay the high social and economic costs imposed by corruption. These costs will include distribution effects that discriminate against the poor and increase the cost of economic and social development.(2) Many countries in Latin America have carried out privatization programs, policies of decentralization, and downsizing of the civil services--reforms that have fostered competition, reduced opportunities for extracting rents, and enhanced the degree of openness and accountability in the public sector. However, "where corruption is systemic, market and administrative reforms do not suffice and ... loosening Government controls can facilitate illicit along with legal economic activity."(3) The transition stage to democracy and market reforms can increase the opportunities for corrupt behavior. As a result, corruption continues to pose a serious problem for many countries in Latin America.
It can be said that corruption is the result of weak institutions and human nature. Some evidence shows that corruption lowers investment and confidence and retards economic growth. Even though in the short run corruption can have a positive economic effect, in the long run the results are likely to be costly in terms of economic efficiency, political legitimacy, and basic fairness.(4) Other effects of corruption can be seen in misallocation of talent, reduced effectiveness of aid flows, loss of tax revenues, patronage, nepotism, and a lower quality of public services.
Corruption can be found across all regions and cultures.(5) It used to override legal norms and can be found in public sector institutions and in the private sector. Corruption affects the social responsibility and integrity of both citizens and institutions. Businessmen tolerate it as long as they gain predictability.(6) Some of the more prevalent areas of corruption involve money laundering and organized crime, particularly drug trafficking.
One of the biggest challenges to strengthening a public institution lies in changing the prevailing organizational culture and value system. It is essential to change the culture where roles and relationships prevail over rules and regulations. In many countries, informal relationships can be more important than formal rules and regulations. In this way, there is a need to strengthen institutions that control corruption and to emphasize formal rules. This requires addressing the sources of informality.
First, it is important to identify the causes of corruption in order to design measures that should be taken to prevent and control corrupt behavior.(7) Identifying the sources or causes of corruption will allow countries to develop a corruption prevention plan that changes the organizational features that allow corruption to occur. A corruption prevention plan should address issues of accountability, efficiency, and effective administration. This would improve the attitudes of the staff and the overall integrity and performance of the institution by minimizing the opportunities for fraud and corruption.
The judiciary, which is the public institution to be studied in this Article, is supposed to provide an essential check on the other public institutions. As a result of this role, a fair and efficient judiciary is key for any anti-corruption plan. Therefore, corruption in the judiciary should be dealt with from the start.
II. AN ECONOMIC AND JURIMETRIC ANALYSIS OF CORRUPTION WITHIN THE PUBLIC SECTOR
For a long time, economists and lawyers have focused their attention on how well-functioning legal and judicial systems affect economic efficiency and development. …