Corruption

Corruption

1. Causes

   • Political
     • Misplaced Incentives in public services delivery
       • scarce benefits and high costs
     • Institutional design
       • Power balance
       • Transparency of checks and balances
       • Degree of law enforcement
       • Degree of centralization
   • Geographical and cultural
     • Corruption practices are ingrained in society
   • Economic
     • Degree of competitiveness
       • Labour market: relative wages
         • Differences between public- public wages
         • Differences between private- public
       • Market structure
         • Monopoly
         • Oligopoly
         • Etc...

2. Definition

   • "Misuse of public office for private gain"

3. (Ackerman, 2008, Myint 2000 and Aidt 2011)

   • Curruption trap

4. Consequences

   • Political
     • Reduces welfare
       • Negative impact on efficacy of public programmes
       • Questionable legitimacy of the State in the eyes of citizens
     • Spiral effects
       • (i) The more corruption it is, more difficult is to catch them
       • (ii) Honest people is discouraged to work in the goverment
   • Economic
     • Reduces economic growth
       • Deters investment
         • Under-investment human capital
         • Over-investment of public infrastructure
     • Increases the existence of illegal business
       • Underground economy/ black markets
     • Creates distortions of factor markets
       • Lower tax revenues
     • Affects income distribution
       • Inequality trap

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