Narrow Results

There is a fundamental conflict of interests between the ruler and most citizens in non-democracies. When the ruler maximizes his benefit from taxation, the major constraint is that citizens might make attempts to overthrow the existing regime. The continuity and stability of regime are crucially related to the degree of support to the existing political regime by the bureaucracy. In this paper, we use a simple model to argue that, when the ruler maximizes his benefit and faces exogenous restriction on wage setting, toleration of corruption is necessary to induce the required support and effort from the bureaucracy. We then relax the exogenous restriction on wages and study the case in which the ruler may eliminate corruption by setting efficiency wage. We also explore the possibility that the ruler may use an audit device to check corruption.

Recent studies in the innovation literature show that Foreign Direct Investment (FDI) enhances innovations in recipient countries through spill-over effects. In this paper we extend the existing literature by incorporating the corruption index in the estimation procedure. Using a cross-country analysis from the Europe and Central Asia (ECA) region, covering 57 countries over the period of 1995–2010, we find no evidence of FDI spill-over effects on innovations, when corruption is endogenously modelled in the regression. Interestingly, we find that corruption and expenditure on education sector are positively related to the number of patents applications, suggesting anti-corruption programs encourage innovations that promote economic growth. Our study shed light on the national innovations and anti-corruption programs.

In theory, trade intensity should positively affect the quality of domestic institutions and governance; the higher the economic openness, the lower the corruption. In practice, however, the growth of economic openness has not been accompanied by the expected improvements in corruption for 34 African countries between 1990 and 2009. This paper presents a plausible explanation for this conundrum. Results from panel data regression analyses indicate that a switch from trading with the Advanced Economies to trading with China increases the perceived corruption level. For instance, in a “representative” African country, a 10% point substitution from trading with the Advanced Economies to trading with China makes its ICRG corruption score decline—indicating increased corruption—by 29%.

This paper modeled the effect of corruption on growth, using Nigerian data for testing. The productivity growth channel of corruption was explored. Cointegration and error correction methods were employed in the analysis. The national system of innovations and corruption exhibited long run relations with productivity growth and were found to be credible fundamentals. The productivity growth vector was considered to be the only plausible in the long run growth analysis. The parsimonious growth equation showed productivity growth and government expenditure as significant and conformed to a priori expectations. The course of policy to sustainable growth was suggestive.

Employing annual data over the period 1996–2013 for 29 OECD countries, this paper explores the impact of corruption on domestic innovative activity, measured by the number of patent and trademark applications, via a linear panel fixed effect model and a nonlinear panel smooth transition regression with all lagged explanatory variables as instrumental variables and under the consideration of potential endogeneity biases. The results indicate several important findings. First, there exists a strong threshold effect between the control of corruption and levels of innovative activity across nations. Second, we note that corruption only has a substantial positive impact on innovation when it is over the threshold level, but not when a country has a seriously corrupt government with low bureaucratic quality, no matter for patent or trademark applications. Hence, heterogeneous beliefs about low transition speed show that OECD countries may not take actions instantly and identically to pursue better bureaucratic quality. Finally, we discover that an improvement over corruption presents greater impacts on patent applications than on trademark applications. Taken together, we confirm that corruption plays a fundamental role in determining innovation activities in OECD countries, offering meaningful policy implications for those policymakers and industries in accordance with our findings.

Using World Bank Enterprise Survey data on bribery and patent applications, we try to study the causal linkage between firm level innovation and corruption in India. Specifically, we try to understand if corruption impacts innovation at the firm level. Since we find that innovation and corruption are jointly determined, we propose instrumental variables regression approach to identify this causal effect. We instrument bribery by exogenously determined external audit parameter and then use a recursive bivariate probit model combined with industry-fixed effects to reach our results. Our findings suggest that bribery has an adverse impact on innovation. The results of our study are much in contrast to the existing literature, which largely supports a positive relationship between innovation and corruption.

The aim of this paper is to explore the relationship between intelligence and economic and financial crimes. For this purpose, we use a cross-sectional sample of 182 countries for the time span of 2012–2017. Our research provides empirical evidence on the existence of a significant impact of intelligence upon economic and financial crimes. When we analyze the entire sample, we find that intelligent people are more prone to comply with the law and thus increase the efficiency of implementing government policies to reduce economic and financial crimes. However, when we conduct our analysis among the two subgroups of high- and low-income countries, different results are obtained. For high-income countries, we obtain evidence of a positive coefficient for the impact of intelligence on economic and financial crimes, meaning that increased intellectual capacities of people from these countries, including high professional knowledge and skills, are used to break the traditional technology in order to get illegal benefits. Our results conducted for the low-income countries' subsample do not support intelligence as being a determining factor for economic and financial crimes; in these countries, other determinants are more important for engaging in such activities. Our study may have important implications for the policymakers who must acknowledge that various policies in the field of economic and financial crimes need to be differentially adopted depending on the level of development of each country, which offers different ways of involvement in such crimes, related to the level of people's intelligence.

We review the literature on foreign direct investment (FDI) and provide an empirical analysis of factors affecting FDI. Conjectures of the disparity of FDI between the coastal and western regions of China and policy recommendations are also made.

In his first term (2012–2017), Xi Jinping’s signature domestic policy was an anti-corruption campaign that targeted political enemies and venality in public office. The anti-corruption work has continued in his second term while being superseded in domestic political importance by a campaign to “Sweep Away Black and Eliminate Evil (2018–2020).” On the surface, the campaign to Sweep Away Black and Eliminate Evil is an anti-crime campaign that focuses on the “black and evil forces” of organized crime and their official protectors, but its scope extends well beyond the ganglands to target a wide range of social and political threats to the Chinese Communist Party (CCP). Drawing on interviews with government officials, police and citizens as well as analysis of policy documents, this paper argues that the campaign is a populist initiative designed to bolster CCP legitimacy and serve as a mechanism of social control. Like the Chongqing prototype that inspired it, however, the campaign harbors a dark side that could undermine the contemporary Chinese social contract in which people are willing to sacrifice personal freedoms in exchange for security and material benefits.

This article examines and evaluates a variety of factors that characterize the PRC at the end of 2023–including elite politics and Xi Jinping’s position; a malaise that grips society; the “securitization” of almost all dimensions of policy; economic challenges and concerns; and the state of the CCP as a ruling Leninist party.

We evaluate the impact of real business cycle shocks on corruption and economic policy in a model of entry regulation in a representative democracy. We find that corruption is pro-cyclical and regulation policy is counter-cyclical. Corrupt politicians engage in excessive stabilization of aggregate fluctuations and behave as if they were Keynesian. We also find that business cycle shocks can induce political instability with politicians losing office in recessions.

The word “corruption” has a moral as well as a qualitative connotation. Corruption is immoral and therefore it has to be stamped out. In this chapter, we discuss some of the quantitative measures of corruption. The Transparency International (TI) has developed several measures. The most popular measure is known as the Corruption Perceptions Index (CPI).

The TI produces another measure of corruption known as the Global Corruption Barometer (GCB). A third measure is known as the Bribe Payers Index (BPI), which assesses the supply side of corruption and ranks corruption by source country and industry sector.

The World Bank corruption index is known as the Control of Corruption Index (CCI). Yet another measure of corruption known as the International Country Risk Guide (ICRG) has been published on a monthly basis since 1980 by what is known as the PRS Group.

A final measure that is discussed in this chapter is known as the Opacity Index (OI). This index was produced for the first time in 2001, by the PricewaterhouseCoopers (PwC).

Since the Second World War, Africa and especially Sub-Saharan Africa (SSA) has had the poorest economic performance of any region in the world. Ironically, many African countries had set out with high hopes once they had thrown off the yoke of colonial rule but it was not long before disaster struck. Against the background of an expanding world economy Africa experienced ‘a chronic failure of economic growth’ (Collier and Gunning, 1996), so that by the end of the 20th century incomes per capita were little better than they had been at the time of independence, and in some cases a good deal worse. The main problem was the failure to improve the efficiency of resource use; in contrast to the position in many other developing countries total factor productivity was either static or negative for much of the time (Ndulu and O'Connell, 1999; Crafts, 2000). Thus while poverty was declining elsewhere, it was increasing steadily in SSA. By the turn of the century two-thirds of the population were estimated to be living at subsistence or below the absolute poverty line, while nearly one-half the world's poor lived in Africa (United Nations, 1997).

There are of course many factors which can explain this remarkable state of affairs, but the one we shall focus on this chapter is Africa's great weakness in statecraft, by which we refer to political systems, bureaucracies, administrative organizations, property and legal rights and general issues of trust and contract enforcement. In other words, it is a question of good governance as opposed to bad governance and corruption. The general argument here is that with few exceptions African countries have lacked a sound social and political base which would favor growth and development and that this base has tended to deteriorate over time.

Corruption is understood by the majority to be harmful to a country although the reason why is rarely understood. For this reason, economists have endeavored to determine the causes and consequences of corruption. Corruption is an important issue for Bangladesh since it is widely spread throughout the country and can lead to many unwanted consequences. Li et al. (2000) found that corruption, for example, can lead to misallocation of resources. Once bribing becomes an integrated part of the market, it will no longer be equal to bidding for scarce resources. They also found that corruption can be harmful to innovation; entrepreneurs have to get licenses and permits to start up new businesses and are often subjected to corruption. This is a consequence of corruption that could be detrimental to Bangladesh's growth. The quality of goods may also be adversely affected, with decisions about the issuing of permits and licenses being determined by the largest bribe paid rather than the highest quality of goods (Lambsdorff, 2007).

This chapter is divided into 4 parts: Part I discusses the concept and various quantitative measures of corruption. As far as this author is aware the PRS Group was the first to score countries based on corruption. Since then a multitude of indices have been produced by well-known institutions such as Transparency International, the World Bank and PricewaterhouseCoopers.

Part II deals with the magnitude of corruption in Bangladesh and more specifically looks at the effectiveness of anti-corruption agencies within the country. The causes of corruption in Bangladesh are also explored, with particular emphasis on banking, customs and telecommunications sectors. In addition, Part II looks at the consequences of corruption on economic growth.

Part III discusses five possible remedies for corruption in Bangladesh and Part IV provides a conclusion.

Since the country's birth in 1971, Bangladesh has hardly experienced good (i.e., just) governance that could potentially allow for political stability and sustainable development. In fact, many commentators consider that challenges such as the rising degradation of natural resources, water crises, the widening gap between the rich and the poor, corruption, crimes and gender issues, are largely due to persisting malgovernance. The growing scale and mutual reinforcement of these conditions appear to have been pushing the country towards social, economic and environmental vulnerability.

Against this background, the paper explores ways to address the prevalent unsustainable situations focusing on the need for just governance within the cultural and human context of the country. It outlines the importance of nurturing and strengthening the cultural beliefs and traditions, including religiosity, patriotism, family and social bondage, self-reliance and traditional happiness that can help progress Bangladesh towards achieving a better governance in terms of socioeconomic and environmental justice. Depicting the inherent sustainability characteristics of Bangladesh, the paper argues that refurbishing of governance with competent, honest, responsible and patriotic politicians, civil servants, activists and other actors is of utter necessity for reversing the current trends in the country.

The chapter concludes that the cultural values of Bangladeshis, which were remarkable in the past, can help revitalize the country's governance for achieving a locally branded “sushashon”, i.e., good and just governance.

The relationship between crime and economic growth, and corruption and economic growth is complex in nature. It is also difficult to compare crime rates both internationally and nationally due to variation not only in legal definition of crime but also in its reporting systems, counting methods, and data quality. In India, average number of offences during the study period is ₹54.77 lakh of which ₹18.48 lakh under Indian Penal Code and ₹36.29 lakh under special and local laws. Crime against body, crime against properties and riots are falling but crime against women and economic offences are rising. This study covers 5 Indian States representing northern, southern, eastern and western part of India including West Bengal. Kerala, a southern state has the highest crime rate but remarkably better in overall functioning of the Criminal Justice System. On the other hand, West Bengal has lowest crime rate but requires improvement in Criminal Justice System. Unlike criminality rate and economic growth, the interrelationship between corruption and economic growth is perceived to be direct and strong. The rank correlation coefficient between ‘corruption perception index’ and ‘per capita GDP rank’ is 0.78 for selected 19 countries and 0.46 for selected Indian states. But there is an inverse relationship between crime and state domestic product. In addition, the data collected from wide range of people under this study reflects that rich persons are responsible for crime and corruption. Most of the respondents are not satisfied with anticorruption measures. Lack of education, poor salary and poverty are considered to be the most important cause for corruption. People's active involvement in eradicating crime and corruption hold the key.

This chapter aims to assess court decisions for eradicating corruption in Indonesia. The data were based on Indonesia Supreme Court decisions from 2001 to 2009. The dataset comprises of 549 cases involving 831 defendants. After the end of Suharto's regime, the Anti-Corruption Bill was ratified in 1999 and was refined in 2001. As Indonesia follows a civil law system, legal certainty has been manifested by stating the level of punishment clearly for each type of offences in the Bill. Despite a clear guidance on the intensity of punishments for each corruption type, judges' decisions on the intensity of punishments sentenced across defendants are far from consistent. Using logistic regressions, we found that the probability of judges in sentencing defendants with financial punishments (that is, fines, compensation and the seizure of evidence) does not depend on the level of economic losses inflicted by the defendants. On the contrary, the judges' decisions tend to be more lenient toward defendants with particular occupations but harsher toward others. The intensity of punishments has been sentenced idiosyncratically and has weakened the deterrence effect of the punishments. In estimating the social cost of corruption, prosecutors have estimated only the explicit cost of corruption, therefore the impact of corruption to Indonesia economy is underestimated. Brand and Price (2000) defined that the social costs of crime includes the costs in anticipation of crime, the costs as a result of crime and the costs in reaction of crime. The total explicit cost of corruption from 2001 to 2009 was Rp73.1 trillion (about US$8.49 billion), however the total financial punishment imposed by the Supreme Court was Rp5.33 trillion (about US$619.77 million). The data show that corruption is mostly committed by people with medium-high income and they usually have good careers.

Within the last decade, Indonesia has been sympathetically admired by commentators for the smooth running of a democratization process following the end of authoritarian regime under Suharto's administration. So far, along with the alteration of political rules of the game, the democratization process that is taking place has generated significant institutional changes, and brings a fairly major transformation in political landscape. Citizens are enjoying free liberal environment and are receiving the rights of speech and association that is guaranteed by the laws. Regular free and fair elections have been conducted for the third time for electing a president, members of senate (Dewan Perwakilan Daerah/DPD) and the people representative assembly (Dewan Perwakilan Rakyat/DPR) at both national and local levels. Free media has also been flourishing and plays an important role in scrutinizing governmental and political affairs. As well, power has been significantly distributed both vertically and horizontally: vertically, Indonesia has been carrying out a broad decentralization process where provincial and local governments are receiving a large number of authorities and responsibilities for the provision of public services; horizontally, a number of new democratic institutions (currently there are about 40 Institutions in the form of committees and commissions) have been formed for exercising a different set of power and rotating the wheel of governance. In addition to these, military force has been sterilized from the political arena and no longer engages, at least on formal regulations, in business activities. In sum, as the World Bank (2003: i) maintains, Indonesia has been able to construct basic requirements for a strong functioning democracy.

When it comes to corruption, however, the extraordinary process of governance reform seems to have no effect. Despite the success story of many democratic accomplishments, Indonesia continuously performs poorly in dealing with corruption. In the last 10 years after democratization began, Indonesia still ranked close to the bottom, together with the most corrupt countries of the world, according to Transparency International's Corruption Perceptions Index. The score has never been far away from the score that was achieved during the authoritarian government era.

On the practical context, the appearance of corruption acts could still be easily observed in almost entire governmental buildings, especially in the places where public service is carried out. Street conversations about the way government officials maintain red-tape bureaucratic procedures in order to attract bribery, collusion between government officials and businessmen to capture public resources as in the case of illegal logging, conspiracy of judicial authorities to take illicit profit from court cases, and the way politicians exercise power to grab public budget are still in the daily reports of the Indonesian media. Due to systematic corruption, the quality of public services remains extremely poor. Devolution and decentralization of power has no meaning other than prosperity for the elites and the new power holders. Needlessly to mention that annually the State Auditing Agency keeps finding a huge number of irregularities in almost every government branch. In short, corruption has not only become an endemic in contemporary Indonesian politics, but also, turns into “a new ideology” where everyone seems born corrupt.

This chapter will try to examine these contrasting phenomena by explaining why the governance reform in a new emerging democratic country like Indonesia is not sufficient to curb corruption. While theoretically the implementation of good governance principles could end chronic abuses of power including corruption, evidence shows that this is not an automatic mechanism. Instead, imprudent process of governance reform may create a fertile ground for the spread of corruption.