This paper analyzes which of various plausible determinants are significantly related to an index of "perceived corruption" compiled from business risk surveys for the mid-1990s. Using 2SLS to reduce problems of endogeneity and a variation of Leamer's "extreme bounds analysis" to test for robustness, it finds three factors robustly significant. Countries that were more economically developed and those which are former British colonies were rated "less corrupt". Those which have a federal structure were "more corrupt". Daniel Treisman Assistant Professor Department of Political Science University of California, Los Angeles 4289 Bunche Hall LA CA 90095-1472 Treisman@polisci.ucla.edu First Draft September 1997 Revised April 1998 ####

Pablo Zoido-Lobaton and Greg Dorchak for efficient research and editorial assistance. We thank particularly Mark Shankerman and Jakob Svensson for very useful suggestions to improve the model. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the World Bank, its Executive In an environment in which bureaucratic burden and delay are exogenous, an individual firm may find bribes helpful to reduce the effective red tape it faces. The “efficient grease ” hypothesis asserts therefore that corruption can improve economic efficiency and that fighting bribery would be counter-productive. This need not be the case. In a general equilibrium in which regulatory burden and delay can be endogenously chosen by rentseeking bureaucrats, the effective (not just nominal) red tape and bribery may be positively correlated across firms. Using data from three worldwide firm-level surveys, we examine the relationship between bribe payment, management time wasted with bureaucrats, and cost of capital. Contrary to the “efficient grease ” theory, we find that firms that pay more bribes are also likely to spend more, not less, management time with bureaucrats negotiating regulations, and face higher, not lower, cost of capital

Abstract: A remarkable diversity of indicators shows quality of life across nations to be positively associated with per capita income. At the same time, the changes in quality of life as income grows are surprisingly uneven. Either in levels or changes, moreover, the effect of exogenous shifts over time is surprisingly strong compared to growth effects. This paper reaches this conclusion with a panel dataset of 81 indicators covering up to 4 time periods (1960, 1970, 1980, and 1990). The indicators cover 7 subjects: (1) individual rights and democracy, (2) political instability and war, (3) education, (4) health, (5) transport and communications, (6) inequality across class and gender, and (7) “bads. ” With a SUR estimator in levels, income per capita has an impact on the quality of life that is significant, positive, and more important than exogenous shifts for 32 out of 81 indicators. With a fixed effects estimator, growth has an impact on the quality of life that is significant, positive, and more important than exogenous shifts for 10 out of 81 indicators. With a first-differences IV estimator, growth has a causal impact on the quality of life that is significant, positive, and more important than exogenous shifts for 6 out of 69 quality of life indicators. The conclusion speculates about such explanations for the pattern of results as: (1) the long and variable lags that may come between growth and changes in the quality of life, and (2) the possibility that global socioeconomic progress is more important than home country growth for many quality of life indicators. 1 I acknowledge assistance on data collection and organization from a fortuitous succession of two hardworking

We offer the first independent scholarly evaluation of the claims, forecasts, and causal inferences of the State Failure Task Force and their efforts to forecast when states will fail. This task force, set up at the behest of Vice President Gore in 1994, has been led by a group of distinguished academics working as consultants to the U.S. Central Intelligence Agency. State failure refers to the collapse of the authority of the central government to impose order, as in civil wars, revolutionary wars, genocides, politicides, and adverse or disruptive regime transitions. State Failure Task Force reports and publications have received attention in the media, in academia, and from public policy decision-makers. In this paper, we identify several methodological errors in the task force work that cause their reported forecast probabilities of conflict to be too large, their causal inferences to be biased in unpredictable directions, and their claims of forecasting performance to be exaggerate...

This paper offers a model of three-party elections which allows voters to combine retrospective economic evaluations with considerations of the positions of the parties in the issue-space as well as the issue-preferences of the voters. We describe a model of British elections which allows voters to consider simultaneously all three parties, rather than limiting voters to choices among pairs of parties as is usually done. Using this model we show that both policy issues and the state of the national economy matter in British elections. We also show how voters framed their decisions. Voters first made a retrospective evaluation of the Conservative party based on economic performance; and those voters that rejected the Conservative party chose between Labour and Alliance based on issue positions. Through simulations of the effects of issues -- we move the parties in the issue space and re-estimate vote-shares -- and the economy -- we hypothesize an alternative distribution of views of the...

Economic development and bureaucratic corruption are determined jointly in a dynamic general equilibrium model of growth, bribery and tax evasion. Corruption arises from the incentives of public and private agents to conspire in the concealment of information from the government. These incentives depend on aggregate economic activity which, in turn, depends on the incidence of corruption. The model produces multiple development regimes, transition between which may or may not occur. In accordance with recent empirical evidence, the relationship between corruption and development is predicted to be negative. 1

UNRISD Discussion Papers are preliminary documents circulated in a limited number of copies to stimulate discussion and critical comment.

University Press, 2003. We thank the excellent feedback from the conference’s commentator on the paper, Simon Johnson, from its convener, Dani Rodrik, and from the conference participants.

comparative and Latin American politics, and his primary areas of research include political parties and party systems, changing patterns of political representation, and democracy and democratization in Latin America. He is currently completing a book manuscript entitled

Many recent studies have looked at the macroeconomic, cultural and institutional determinants of corruption at the cross-national level. Using enterprise-level data on bribes paid to utilities in 21 transition economies in Eastern Europe and Central Asia, we examine how characteristics of the utilities taking bribes and the firms paying bribes affect the equilibrium level of corruption in the sector. Bribe takers (utility employees) are more likely to take bribes in countries with greater constraints on utility capacity, lower levels of competition in the utility sector, and where utilities are state-owned. Bribe payers (enterprises) are more likely to pay bribes when they are more profitable, have greater overdue payment to utilities, and are de novo private firms. Our study has several advantages over most existing studies. First, it uses an objective measure of corruption, rather than a subjective measure. Second, the large firm-level sample, which includes firms from multiple countries, allows us to examine both firm-level and national factors that might affect corruption. Finally, we are able to examine the behavior of both bribe takers and bribe payers.