Corruption, institutions, and economic development

Abstract

Many scholarly articles on corruption give the impression that the world is populated by two types of people: the "sanders" and the "greasers". The "sanders" believe that corruption is an obstacle to development, while the "greasers" believe that corruption can (in some cases) foster development. This paper takes a critical look at these positions. It concludes that the evidence supporting the "greasing the wheels hypothesis" is very weak and shows that there is no correlation between a new measure of managers'actual experience with corruption and GDP growth. Instead, the paper uncovers a strong negative correlation between growth in genuine wealth per capita -a direct measure of sustainable development -and corruption. While corruption may have little average e¤ect on the growth rate of GDP per capita, it is a likely source of unsustainable development.

Does Corporate Governance Influence Earnings Management in Latin American Markets?

“…While corruption is prevalent in emerging countries, there is increasing focus on the degree of its predictability to affect the effective functioning of governments and economies (Gill and Kharas 2007;Aidt 2009). Voliotis (2011) look at different forms of organisational corruption in the European Union; Galang's (2011) study reviews the corruption literature in leading management journals while Dela Rama (2011) looks at how the CG of family-owned business groups, deals with different forms of corruption in Asia.…”

“…We integrate this index using three main indicators that previous literature has shown as very important factors in measuring the way in which the governability of a country helps to reduce or increase opportunistic behavior in firms: control of corruption, rule of law, and government effectiveness (Aidt 2009;Voliotis 2011;Galang 2011). Low levels of governability (a low index value) imply, generally, behaviors that affect the trust placed in public officials and, therefore, undermine the basis of government trust (Shleifer and Vishny 1993).…”

“…The specific characteristics of Latin American countries make it also interesting to analyze the country governability level, because corruption is prevalent in emerging countries, affecting the effective function of governments and economies (Gill and Kharas 2007;Aidt 2009). The implementation of controls aimed at reducing corruption, to strengthen the rule of law or to improve the effectiveness of the government in a country could lead to a reduction in opportunistic behavior and, consequently, could reduce the earnings management practices in firms.…”

Corruption and political stability: Does the youth bulge matter?

“…In contrast to this stream in the literature, there are studies that suggest that corruption is (more) an obstacle to development (Aidt, 2009). Corruption distorts public funds and directs them towards areas where bribes can be more easily collected, such as capitalintensive infrastructure projects, rather than investing in the employment-intensive health care and education sectors (Mauro, 1995;Gupta et al, 2001;Blackburn and Sarmah, 2008).…”

Context, law and reinvestment decisions: Why the transitional periphery differs from other post-state socialist economies

“…We avoid this by utilising the number of employees as proxy. From a methods standpoint, our use of micro-data together with the actual experience of working MNE managers means that we avoid any distortionary effects arising from the use of perception-based indices (Aidt, 2009). Again, we find that size is a particularly important factor on the transitional periphery; quite simply, larger firms with greater resources at their disposal are better equipped to ride out environmental turbulence.…”