Corruption Flashcards
Define Corruption
Power of public office used for personal gain that contravenes the rules of the game
What are the 2 types of corruption?
Petty
Grand
What is Petty Corruption?
Bribe is paid to a lower hierarchy bureaucrat to provide or speed up a service
What is Grand Corruption?
involves large payments to higher ranks
e.g. Bribes for Public contracts
Why is it difficult to measure corruption?
Lack of Data/Reliable data
There are many different forms of corruption
Corruption is done in Secrecy
What should a good corruption measure be able to determine?
Quality of underlying Institutional Framework
What are the 3 main Corruption measures?
Corruption Perception Index (CPI)- by Transparency International
Control of Corruption- World Governance Indicators (W.B)
Bribe Payers Index- by Transparency International
What is the Corruption Perception Index?
Aggregate measure based on Perceptions of Business people + country Experts
0-100–> Corrupt-Clean
Data since 1995
What is the Bribe Payers Index?
Measures Perceived likelihood of companies from major economies to pay bribes abroad
Survey-based measure
0-10–> 10=Countries never bribe abroad
Why is it important NOT to use Objective data?
At an International level- Different legal definitions
-Different Statistical Methodologies of data aggregation
Measure would reflect Efficacy of State’s Judiciary- NOT prevalence of Corruption
What are the 3 necessary conditions for Corruption?
Discretionary Power
Economic Rents
Weak Institutions
What is Discretionary Power?
Public officials must possess Authority to design/administer Regulations + Policies in a Discretionary (secretive) manner
What are Economic Rents?
Discretionary Power must allow Extraction of Existing or New Rents
What are Weak Institutions?
Political, Administrative + Legal institutions must create incentives for Public Officials to use their Discretionary power to extract or create rents
What factors can be used to Reform Corruption?
Democracy
Freedom of Press
Improve Quality of Judiciary
What is the Causality question for corruption?
Weak Institutions–> Corruption–> Poor Economic Outcomes?
Poor Economic Outcomes–> Corruption–> Weak Institutions?
What CPI show about the Consequences of Corruption?
Strong Negative Correlation between Corruption + GDP/capita
how does Corruption lead to Lower GDP
Corruption–> Economic Rents–> Inefficient Economic policies–> Lower GDP- Poverty Trap
How do Higher Income levels lead to Lower Corruption?
High Income levels–> Increased determination to fight Inefficiencies–> Lower Economic Rents–> Lower Corruption
In the S/M Run, what happens with Corruption + Income?
If country in a bad equilibrium- Corruption + Income feed off each other- Corruption worsens
If country in a good equilibrium- Corruption + Income feed off each other- Corruption falls
In the LR what is the cause of corruption?
Income–> Corruption
What is the association between Corruption + GDP/capita & Corruption + GDP/capita Growth?
Corruption + GDP/capita- STRONG
Corruption + GDP/capita- WEAK
How are High Corruption levels associated with Gov. Services, Expenditure + Revenues?
Inefficient Gov. Services + Low-quality Public Healthcare
Low Gov. Spending on Education + Increased Spending on Military
Reduced collection of Tax Revenues- mostly Direct Taxes
How are International Investors + Exporters affected by corruption?
Some exporters more willing to offer bribes than others
Investors from corrupt countries less sensitive to Corruption
