On the Political Nature of Corruption
Daniel Lederman, Norman V. Loayza, and Rodrigo R. Soares
Corruption is generally regarded as one of the most serious obstacles to development. Recent evidence shows corruption has a negative impact on important economic outcomes. Mauro (1995) and Burki and Perry (1998) claim that corruption reduces economic growth through reduced private investment; Kaufmann, Kraay and Zoido-Loboton (1999) find that corruption limits development, as measured by per capita income, child mortality, and literacy; and Bai and Wei (2000) argue that corruption affects the making of economic policy. Therefore, it is important to understand the determinants of corruption and the limitations that they impose on the prospects of growth and development.
In the previous chapter, Kaufmann and Dininio investigated the causes of corruption and also presented a multifaceted anti-corruption strategy. In this chapter, we explore in more detail two of the five strategies presented in chapter 2: political accountability and the structure of public sector management.
The literature in political science and economics has made numerous efforts in this direction and has stressed the importance of political institutions in shaping the patterns of government corruption; nevertheless, the corresponding empirical literature is relatively scarce.1 This chapter summarizes our attempts to contribute to the emerging empirical literature on the determinants of government corruption across countries and over time, with particular attention devoted to the role of political institutions.2
We will show that political and economic institutions affect corruption through two channels: political accountability and the structure of provision of public goods. Political mechanisms that increase political accountability, either by encouraging punishment of corrupt individuals or by reducing the informational problem related to government activities, tend to reduce the incidence of corruption. Likewise, economic
1 Though still scarce, the empirical literature on political institutions and corruption is growing. Some important contributions are Tanzi (1998); La Porta et al. (1999); Fisman and Gatti (2000); Treisman (2000); Persson, Tabellini, and Trebbi (2001); and Kunicova and Rose-Ackerman (2002).
2 This case study summarizes the analyses contained in Lederman, Loayza, and Soares 2005.