The Political Economy of Corruption

By Arvind K. Jain | Go to book overview

5

Corruption, growth, and publicfinances

Vito Tanzi and Hamid Davoodi

Introduction

In the last decade corruption has received a great deal of attention from a broad spectrum of the public. The study of corruption is no longer regarded as a subject of inquiry exclusively by students of politics and sociology. It now occupies the attention of many other fields such as political economy, public administration and law. Many international and regional organizations now regard corruption and poor governance as major obstacles to good policy-making. The current interest in corruption probably reflects an increase in the scope of corruption over the years, and is in part fueled by a better understanding of the economic costs of corruption. Thus it does not just reflect a greater awareness of an age-old problem.

Until recently segments of the economic literature had presented a romantic view of corruption. This view made corruption seem an almost virtuous activity and possibly good for growth in a world stifled by bad governments. For example, in various theoretical studies it was argued that corruption removes or relaxes government-imposed rigidities; greases the wheels of commerce; allocates investment and time to the most efficient users; keeps wages low; and may even act as a political glue that holds a country together. 1 The romantic view of corruption has been replaced, in more recent years, by a more realistic and much less favorable view. According to this new view, the payment of bribes is not a panacea for overcoming red tape and cumbersome government regulations; the highest bribes are paid by rent-seekers and not by the most efficient individuals; a comprehensive civil service reform is better at reducing corruption than simply raising wages; corruption is subject to increasing returns which perpetuate it; and corruption creates an environment that, in time, can lead to the collapse of political regimes.

This chapter elaborates on these contrasting views of corruption and, from this perspective, analyzes the conceptual and empirical links between corruption, economic growth, and public finances. There are many indirect channels through which corruption lowers growth, and

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The Political Economy of Corruption
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Figures vii
  • Tables viii
  • Part I - Governance and Corruption 1
  • 1 - Power, Politics, and Corruption 3
  • 2 - The Definitions Debate 11
  • Notes 29
  • Part II - Political Systems and Corruption 33
  • 3 - Political Corruption and Democratic Structures 35
  • 4 - Why Do Voters Support Corrupt Politicians? 63
  • Part III - Policy and Political Outcomes 87
  • 5 - Corruption, Growth, and Public Finances 89
  • Notes 107
  • 6 - Corruption and the Provision of Health Care and Education Services 111
  • Notes 133
  • Appendix 136
  • Bibliography 138
  • 7 - Historical Antecedents of Corruption in Pakistan 142
  • Bibliography 154
  • Part IV - Solutions and Future Research 155
  • 8 - Measuring Corruption 157
  • Appendix 176
  • Bibliography 177
  • 9 - Legislating Against Corruption in International Markets 180
  • Notes 207
  • Bibliography 212
  • 10 - Controlling Power and Politics 214
  • Bibliography 219
  • Index 220
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