Political stability, corruption and trust in politicians

Abstract

In this article we develop a dynamic model where an endogenous evolution of trust impacts a politician's choice for bribe-taking and tax re-distribution. The politician obtains utility from net income that comes from his wage income, tax embezzlements and bribe-taking, and he also has incentives for tax re-distribution. The higher the tax embezzlements and the more bribes the politician takes the lower his citizens' trust and the less likely will he be re-elected. We support the evolution of trust with an econometric investigation.We analyze the necessary and sufficient conditions, and find that withholding taxes and taking bribes may be complements or substitutes for a politician, depending on the politician's incentives for tax re-distribution. Without these incentives, tax embezzlement and bribe taking are necessarily substitutes. With sufficiently strong incentives, we find re-distribution and bribe-taking may become complements. Complements implies that the politician, at least partly, increases bribe-taking because this allows him to increase re-distribution, which aids his additional motives for tax re-distribution.Based on comparative statics at steady state we also find that the higher the politician's wage the lower the bribe-taking and the higher the trust; stronger social capital leads to less bribe-taking and higher levels of trust; improvements in electoral accountability induce a decrease in bribing while trust increases.

The effect of good governance on business creation: a multilevel approach

“…Corruption may coexist with high economic performance, but it is a phenomenon that jeopardises the functioning of democratic institutions and contributes to a climate of political instability. In this sense, both variables report a strong linkage (Schumacher, 2013). Thus, what has been said about the first variable may be applied, in part, to the second variable.…”

Corruption, Political Instability and Economic Development in the Economic Community of West African States (ECOWAS): Is There a Causal Relationship?

“…In fact, low income levels or civil servant wages encourage rent-seeking behavior because people see corruption as an opportunity to improve their socio-economic well-being. By contrast, an improvement in economic conditions (such as higher wages or income) tends to lower corruption (Montinola & Jackman, 2002;Van Rijckeghem & Weder, 2001;Schumacher, 2013). Similarly, declining economic fortunes encourages discontent and socio-political instability.…”

“…Mauro (1995) noted that low-income (less developed) countries tend to be corrupt and politically unstable. Hence, higher-income countries (with improvements in economic conditions) tend to have lesser corruption (Montinola & Jackman, 2002;Van Rijckeghem & Weder, 2001;Schumacher, 2013) and higher political stability (Adelman & Morris, 1968;Helliwell, 1994). Corruption and political instability, including economic development, seem to reinforce one another, at least in the ECOWAS region.…”

Corruption and democratic institutions: a review and synthesis

“…In the corruption context, sanctioning poor (corrupt) performance is likely to be more significant than selecting good (uncorrupt) public officials, because it is more difficult to observe ahead of time whether a politician or party is corrupt than it is to evaluate whether that politician or party has behaved corruptly when in office. It is likely that this mechanism-voting corrupt politicians out of office-is what most commentators have in mind when they suggest that democratization may substantially reduce corruption (Harsch 1993;Mohtadi and Roe 2003;Wilson and Damania 2005;Schumacher 2013).…”