Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Lobbying, Corruption and Political InfluenceNauro F. Campos Francesco Giovannoni The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit company supported by Deutsche Post World Net. The center is associated with the University of Bonn and offers a stimulating research environment through its research networks, research support, and visitors and doctoral programs. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. Conventional wisdom suggests that lobbying is the preferred mean for exerting political influence in rich countries and corruption the preferred one in poor countries. Analyses of their joint effects are understandably rare. This paper provides a theoretical framework that focus on the relationship between lobbying and corruption (that is, it investigates under what conditions they are complements or substitutes). The paper also offers novel econometric evidence on lobbying, corruption and influence using data for about 4000 firms in 25 transition countries. Our results show that (a) lobbying and corruption are substitutes, if anything; (b) firm size, age, ownership, per capita GDP and political stability are important determinants of lobby membership; and (c) lobbying seems to be a much more effective instrument for political influence than corruption, even in poorer, less developed countries.JEL Classification: E23, D72, H26, O17, P16

This essay surveys macroeconomic issues that marked the transition from planned to market economy in Central and Eastern European and former Soviet Union countries. We first establish stylized facts of the transition so far. We then critically survey the theoretical literature on transition, discussing explanations for the initial output fall, and mediumterm issues such as optimal speed of transition, disorganization, institutions and sectoral reallocation as source of output dynamics. We review the empirical literature to assess how well it translates the theoretical models and explains the stylized facts. We conclude with suggestions for future research.

This essay surveys macroeconomic issues that marked the transition from centrally planned to market economy in Central and Eastern European and former Soviet Union countries. We first establish a set of stylized facts of the transition so far, namely: (1) output fell, (2) capital shrank, (3) labor moved, (4) trade reoriented, (5) the structure changed, (6) institutions collapsed, and (7) transition costs. We then critically survey the theoretical literature on transition, discussing various explanations for the initial output fall as well as medium term issues, such as optimal speed of transition, disorganization, institutions and sectoral reallocation as a source of output dynamics. Last, we review the empirical literature to assess how well it translates the theoretical models and explains the stylized facts. The essay concludes with a succinct list of suggestions for future research.

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Although the theoretical literature has identi¢ed various sizeable bene¢ts from foreign direct investment (FDI) in£ows, the empirical literature has been unable to establish a positive and signi¢cant impact of FDI on the rates of economic growth of host countries. One reason for this di¤culty is that theory equates FDI to technology transferred, while in most countries and regions of the world FDI encompasses an array of arrangements that goes well beyond pure technology transfer. This paper tests for the e¡ects of FDI on growth in a set of countries in which FDI is pure technology transferred: the 25 Central and Eastern European and former Soviet Union transition countries between 1990 and 1998. Our main ¢nding is that, in this more appropriate setting, FDI has a positive and signi¢cant impact on economic growth as theory predicts.

Although the theoretical literature has identi¢ed various sizeable bene¢ts from foreign direct investment (FDI) in£ows, the empirical literature has been unable to establish a positive and signi¢cant impact of FDI on the rates of economic growth of host countries. One reason for this di¤culty is that theory equates FDI to technology transferred, while in most countries and regions of the world FDI encompasses an array of arrangements that goes well beyond pure technology transfer. This paper tests for the e¡ects of FDI on growth in a set of countries in which FDI is pure technology transferred: the 25 Central and Eastern European and former Soviet Union transition countries between 1990 and 1998. Our main ¢nding is that, in this more appropriate setting, FDI has a positive and signi¢cant impact on economic growth as theory predicts.

Executive SummaryThe analysis of the consequences of socio-political instability has been a central theme in recent macroeconomic research, in general, and in the economic growth literature, in particular. There are two different views on the nature of the relationship between political instability and growth. Some authors submit that political instability disrupts productive activities and increases uncertainty. By doing so, it undermines the incentives for the accumulation of physical capital with detrimental consequences for the rate of economic growth. Other economists argue that economic growth leads to more political instability because growth entails substantial structural changes that undo political coalitions and induce painful read*justments in the balance of power among different interest groups.Despite the negative relationship between political instability and economic growth having been elevated to "stylized fact" status, the empirical studies on which this assessment is based have been heavily criticized for ad hoc selection of explanatory variables, excessively narrow definitions of political instability, insufficient sensitivity analysis and failure to investigate the direction of causality. Although not fully sharing this criticism, we believe that this finding should not be elevated to "stylized fact" status without demonstrating that causality exists and runs from political instability to growth, rather than vice-versa.The objective of this paper is to investigate the existence and direction of a causal relationship between political instability and economic growth. To do so, we construct two indexes of political instability (one for mild and the another for severe instability) for non-overlapping five-year periods, between 1960 and 1995, for 98 developing countries. We use the Granger causality framework and report Anderson-Hsiao-Arellano instrumental variable estimates.We find no evidence of the hypothesized negative and causal relationship between political instability and economic growth. Our sensitivity analysis, however, suggests two possible explanations for the apparent disagreement between our findings and those of the rest of the literature. First, for the full sample, the negative relationship obtains only contemporaneously (and independently of whether we use 25-or 5-year averages). Second, in the long run and ignoring institutional factors, the Sub-Saharan Africa sample seems to be the driving force in arriving at the negative relation between growth and political instability.Abstract: An unstable macroeconomic environment is often regarded as detrimental to economic growth. Among the sources contributing to such instability, the literature has assigned most of the blame to political issues. This paper empirically tests for a causal and negative long-term relation between political instability and economic growth, but finds no evidence of such a relationship. Sensitivity analysis indicates that there is a contemporaneous negative relationship and that, in the long run and ignoring...

This paper examines the importance of agglomeration economies and institutions vis-à-vis initial conditions and factor endowments in explaining the locational choice of foreign investors. Using a unique panel data set for 25 transition economies between 1990 and 1998, we find that the main determinants are institutions, agglomeration and trade openness. We find important differences between the Eastern European and Baltic countries, on the one hand, and the former Soviet Union countries on the other: in the latter group, natural resources and infrastructure matter, while agglomeration matters only for the former group.