CORRUPTION

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CORRUPTION

• Transition Economies
• Presented By AJ Cericola

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Definition of Corruption

• Misuse of Power for private gain
• ? Bribery
• ? Extortion
• ? Manipulation of Laws
• Its all about growth

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Corruption Type 1

• State Capture Corruption
• ? Influencing Laws, Regulations, Policies for
  own advantage

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Corruption Type 2

• Administration Corruption
• ? Intentional imposition of distortions in the
  prescribed implementation of existing laws

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Corruption Across the Globe
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Corruption and Growth
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Corruption and Development
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Sectors of Corruption Enterprise
Growth

• SMEs are most important for jobs, innovation,
  and growth
• 1. Labor force and new jobs
• 2. Less capital intensive more labor
• 3. Product innovative, not process innovative
• 4. More financially constrained represent 94
  
• of business finance
• 5. Contribute to growth in recession more than
• larger firms

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Bribes Paid
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Sectors of Corruption
Investment

• Much economic theory assume positive relationship
  between investment and growth
• 4 areas Corruption affects investment
• 1. Total investments
• 2. Size and composition of FDI
• 3. Size of public investment
• 4. Quality of decisions and projects

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Sectors of Corruption
Investment

• Studies show that improvements in the corruption
  index (i.e. reduction in corruption) can increase
  investment GDP ratio
• Comparison
• ?1 increase in MTR on FDI reduction of
  incoming FDI 3.3
• ?1pt. increase on corruption index reduction in
  the flow of FDI 11

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Anti-Corruption What can be done?
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Case Study Poland

• 1956 Khrushchev denounces Stalin
• Workers strike in Poznan starts market socialism
  and limited civil liberties
• 1980 emergence of Solidarity
• 1989 parliamentary political system with
  proportional representation
• Strong public administration skills

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Case Study Croatia Slovak Republic

• Advanced among Central Eastern
• European countries
• Nationalism
• Concentration of political power
• 1994 worst year of corruption for Slovak
  Republic and Croatia

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Croatia
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Slovak Republic
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Case Study Latvia

• State Capture is high
• Economy is highly concentrated political parties
  run close with economic interests
• 1995 adoption of conflict of interest laws
• 1997 Corruption Prevention Council

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Latvia
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Transparency CPI Index
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After thoughts

• Why does Poland have a decreasing CPI? Do they
  not have an anti-corruption strategy?
• Can bad infrastructure cause corruption?
• Your Questions