Friday, July 01, 2005
Corruption: An Economic Perspective
By: Paul Holden and Jennifer Sobotka, Enterprise Research Foundation
Paper presented at the XIIIth International Congress of the International Society of Social Defence, Lecce, Italy, November 28-30, 1996
Corruption comes in many shapes and forms. It is difficult to define and sometimes difficult to identify. In its most general sense, corruption is the violation of the arms length relationships in transacting between any pair or group of agents. Rather than addressing every aspect of corruption, however, this paper focuses on what we believe to be the most damaging form of corruption, namely the sale for personal gain by government officials of government property in the most general sense. This includes licenses, permits, contracts, documents such as passports and visas, tax incentives or dispensations, and so on. Clearly, it also could be specific physical property, but the paper uses a more extensive definition since corruption is not limited to physical asset sales. Usually what is sold is not needed for its own sake but rather because it enables private agents to earn economic rents on their activities. The paper presents: (1) a framework for analyzing corruption, (2) the circumstances under which it occurs, (3) different ways in which it can be organized, (4) the consequences for the economy, and (5) the economic, legal or other steps that we can take to inhibit or prevent it.
Paper presented at the XIIIth International Congress of the International Society of Social Defence, Lecce, Italy, November 28-30, 1996
Corruption comes in many shapes and forms. It is difficult to define and sometimes difficult to identify. In its most general sense, corruption is the violation of the arms length relationships in transacting between any pair or group of agents. Rather than addressing every aspect of corruption, however, this paper focuses on what we believe to be the most damaging form of corruption, namely the sale for personal gain by government officials of government property in the most general sense. This includes licenses, permits, contracts, documents such as passports and visas, tax incentives or dispensations, and so on. Clearly, it also could be specific physical property, but the paper uses a more extensive definition since corruption is not limited to physical asset sales. Usually what is sold is not needed for its own sake but rather because it enables private agents to earn economic rents on their activities. The paper presents: (1) a framework for analyzing corruption, (2) the circumstances under which it occurs, (3) different ways in which it can be organized, (4) the consequences for the economy, and (5) the economic, legal or other steps that we can take to inhibit or prevent it.