Seeds of Corruption : Do Market Institutions Matter?
Ten years into the transition, corruption is so pervasive that it could jeopardize the best-intentioned reform efforts. The authors present an analytical framework for examining the role market institutions play in rent-seeking and illicit behavior...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2000/06/437225/seeds-corruption-market-institutions-matter http://hdl.handle.net/10986/19833 |
| Summary: | Ten years into the transition,
corruption is so pervasive that it could jeopardize the
best-intentioned reform efforts. The authors present an
analytical framework for examining the role market
institutions play in rent-seeking and illicit behavior.
Using recently available data on the incidence of
corruption, and on institutional development, they provide
preliminary evidence on the link between the development of
market institutions, and incentives for corruption.
Virtually all of the indicators they examine appear to be
important, but three are statistically significant: 1) the
intensity of barriers to the entry of new business. 2) The
effectiveness of the legal system. 3) The efficacy and
competitiveness of services provided by infrastructure
monopolies. The main lesson emerging from their analysis: a
well established system of market institutions - clear and
transparent rules, fully functioning checks and balances
(including strong enforcement mechanisms), and a robust
competitive environment - reduces opportunities for
rent-seeking and hence incentives for corruption. Both the
design, and effective implementation of such measures are
important if a market system is to be effective. It is not
enough, for example, to enact first-rate laws if they are
not enforced. The local political economy greatly affects
whether a given policy reform will curtail corruption.
Especially important are the following factors in the
political economy: a) the credibility of the
government's commitment to carrying out announced
reforms. B) The degree to which government officials are
captured by the entities they regulate or oversee. C) the
stability of the government itself. D) The political power
of entrenched vested interests. Economists in the field of
industrial organization, antitrust, and regulation have long
recognized these factors as potent determinants of
opportunistic behavior, corruption, and "capture"
of government officials. Only now are they becoming
conventional wisdom among specialists in economies in transition. |
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