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Econ171 Economic Development
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'Most commonly refers to the misuse of public power for private gain. ... Ethnolinguistic fractionalism and nepotism. Econ 171 Lecture 24 Atanu Dey. 6 ... – PowerPoint PPT presentation
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Title: Econ171 Economic Development
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Econ171 Economic Development
- Corruption and Economic Development
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Corruption
- Power corrupts, and absolute power corrupt
absolutely. - Lord Acton
- In third world countries, the corrupt get power
and the absolutely corrupt get absolute power. - Atanu Dey ?
- See that bridge?
3
Definition
- Most commonly refers to the misuse of public
power for private gain. Incentives for corruption
arise whenever a public official has
discretionary power to allocate government
services, on which it typically has a monopoly,
to the private sector. - Klitgaard summarizes the basic ingredients of
corruption as being equal to monopoly power plus
discretion minus accountability. - Corruption and Economic Development, Nicholas
A. Lash, Loyola University Chicago - http//bit.ly/epm6C
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Government and Corruption
- Rent Seeking
- Monopoly control of the economy
- Corruption discourages investment, limits
economic growth, and alters the composition of
government spending, often to the detriment of
future economic growth
5
Public Corruption
- Public corruption can be traced to government
intervention in the economy, policies aimed at
liberalization, stabilization, deregulation, and
privatization can sharply reduce the
opportunities for rent-seeking behavior and
corruption. Where government regulations are
pervasive, however, and government officials have
discretion in applying them, individuals are
often willing to offer bribes to officials to
circumvent the rules. -- Paolo Mauro
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Causes of Corruption
- Engineered Shortages
- Socialism
- Trade Restrictions
- Subsidies
- Price Controls
- Multiple Exchange Rates and Forex allocation
schemes - Low wages in the civil service
- Natural resource endowment
- Ethnolinguistic fractionalism and nepotism
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Consequences of Corruption
- Lowers investment and retards economic growth
- Rent seeking misallocates talent
- Reduces the effectiveness of aid flows
- Loss of tax revenues, leading to adverse
budgetary consequences - Lower quality infrastructure and public services
- Distorts the composition of government
expenditure - Kakistocracy!!
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Transparency International
- www.transparency.org
- 2008 Corruption Perception Index for 180
countries - Top ranks Denmark, New Zealand, Sweden,
Singapore, Finland, Switzerland - Bottom ranks Somalia, Burma, Iraq, Haiti,
Afghanistan - China 72, India 85, Pakistan 134, Bangladesh 147
- Burkina Faso 80 ?
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Some References
- Why Worry About Corruption by Paolo Mauro. IMF.
- http//bit.ly/pCJIV
- Corruption as an impediment to economic growth.
- Greg Mankiw http//bit.ly/GXzvI
- The Persistence of Corruption and Slow Economic
Growth by Paulo Mauro. IMF Working Paper - Read the last section, pages 21-22.
- http//bit.ly/44fhNb
- Corruption and Economic Growth
- Nicholas Lash. May 2003
- http//bit.ly/epm6C
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