Corruption and regulatory burden

Dzhumashev, Ratbek (2008): Corruption and regulatory burden.

Abstract

It is known that government has discretionary power in providing public goods and regulating the economy. Corrupt bureaucracy with discretionary power creates and extracts rents by manipulating with the public good supply and regulations: i) by attaching excessive red tape to the public good they are providing; ii) or by making the regulations di±cult for the private agents to comply with. The former type of corruption results in less public input being provided at higher cost to the private agents. The latter increases non-compliance, which then breeds bribery. Consequently, the overall public sector burden is higher in the environment with corrupt bureaucracy. We show this outcome using a simple theoretical model, and then confront it with empirical evidence.

• Item Type: MPRA Paper
• Language: English
• Keywords: corruption, regulatory burden
• Subjects: D - Microeconomics > D7 - Analysis of Collective Decision-Making > D73 - Bureaucracy ; Administrative Processes in Public Organizations ; Corruption; L - Industrial Organization > L5 - Regulation and Industrial Policy > L51 - Economics of Regulation; H - Public Economics > H4 - Publicly Provided Goods > H41 - Public Goods; D - Microeconomics > D0 - General > D02 - Institutions: Design, Formation, Operations, and Impact; H - Public Economics > H2 - Taxation, Subsidies, and Revenue > H23 - Externalities ; Redistributive Effects ; Environmental Taxes and Subsidies

References

Ali, A. M. and H. S. Isse (2003). Determinants of economic corruption: A cross-country comparison. Cato Journal 22 (3), 449{466. Bailey, D. (1966). The e®ects of corruption in a developing nation. Western Political Quarterly 19 (4), 719{732. Bardhan, P. (1997). Corruption and development: a review of issues. Journal of Economic Literature 35 (3), 1320{1347. Barreto, R. A. (2000). Endogenous corruption in a neoclassical growth model. European Economic Review 44 (1), 35{60. Barreto, R. A. (2003). A Model of State Infrastructure with Decentralized Public Agents: Theory and Evidence. Discussion Paper No. 0307, Centre for International Economic Studies, University of Adelaide. Barreto, R. A. and J. Alm (2003). Corruption, optimal taxation, and growth. Public Finance Review 31 (3), 207{40. Barro, R. J. (1990). Government spending in a simple model of endogenous growth. The Journal of Political Economy 98 (5 Part 2), S103-S125. Brunetti, A., G. Kisunko, and B. Weder (1998). Credibility of rules and economic growth: Evidence from a worldwide survey of the private sector. World Bank Economic Review 12 (3), 353-384. Genest, C. and J.-C. Boies (2003). Detecting dependence with kendall plots. American Statistical Assocsiation 57 (4), 1-10. Guriev, S. (2004). Red tape and corruption. Journal of Development Economics 73, 489-504. Huntington, S. P. (1968). Political Order in Changing Societies. New Haven, CT: Yale University Press. Jain, A. K. (2000). Corruption and Business: A Review. Spellbound Publications. Kaufmann, D., A. Kraay, and M. Mastruzzi (2004). Measuring Governance Using Cross-Country Perceptions Data. Washington DC.: World Bank. Kaufmann, D. and S. Wei (1999). Does 'grease money" speed up the wheels of commerce? Number 7093. NBER. Keefer, P. and S. Knack (2002). Rent-seeking and Policy Distortions when Property Rights are Insecure. Number 2910. The World Bank. Kurer, O. (1993). Clientalism, corruption and the allocation of resources. Public Choice 77 (2), 259-273. Le®, N. (1964). Economic development through bureaucratic corruption. American Behavioral Scientist 8 (3), 8-14. Leys, C. (1965). What is the problem about corruption? Journal of Modern African Studies 3 (2), 215-230. Lui, F. T. (1985). An equilibrium queuing model of bribery. Journal of Political Economy 93, 760-781. Mauro, P. (1995). Corruption and growth. Quarterly Journal of Economics 110, 681-712. McChesney, F. S. (1997). Money for nothing : politicians, rent extraction, and political extortion. Cambridge, Mass.: Harvard University Press. Meon, P.-G. and L.Weill (2006). Is corruption an e±cient grease? a cross-country aggregate analysis. In Public Choice Conference 2006,, Amsterdam. Mo, P. H. (2001). Corruption and economic growth. Journal of Comparative Economics 29 (1), 66-79. Myrdal, G. (1968). Asian Drama: An Enquiry into the Poverty of Nations, Volume 2. New-York: the Twentieth Century Fund. Ng, Y.-K. (2000). Efficiency, equality and public policy: With a case for higher public spending. New York, London: St. Martin's Press; Macmillan Press. Olson, M. (1984). The Rise and Decline of Nations:Economic Growth, Stagnation, and Social Rigidities. New Haven: Yale University Press. Shleifer, A. and R. W. Vishny (1993). Corruption. The Quarterly Journal of Economics 108 (3), 599-617. Tanzi, V. (1998). Corruption around the world - causes, consequences, scope, and cures. International Monetary Fund Staff Papers 45 (4), 559-594.