Corruption and Regulatory Structures*

We challenge the conventional definition of corruption as the 'abuse of public office for private gain', making a distinction between legal and illegal forms of corruption, and paying more attention to corporate patterns of corruption (which also affect public corruption). We undertake to identify general determinants of the pattern of legal and illegal corruption worldwide, and present a model where both corruption (modelled explicitly in the context of allocations) and the political equilibrium are endogenous. Three types of equilibrium outcomes are identified as a function of basic parameters, namely initial conditions (assets/productivity), equality, and fundamental political accountability. These equilibria are: i) an illegal corruption equilibrium, where the political elite does not face binding incentives; ii) a legal corruption equilibrium, where the political elite is obliged to incur on a cost to "deceive" the population, and, iii) a no-corruption equilibrium, where the population cannot be deceived. An integral empirical test of the model is performed, using a broad range of variables and sources. Its core variables, namely regarding legal corruption (and other manifestations of corporate corruption) come from an original survey developed with the World Economic Forum (in the Executive Opinion Survey 2004 of the Global Competitiveness Report). The empirical results generally validate the model and explanations. Some salient implications emerge. JEL Codes: O57, P16.

Policy Research Working Papers, 2013

Political Studies, 2005

Discussion of the definition of corruption has progressed little since Heidenheimer's groundbreaking distinction between definitions centred on public opinion, public office and public interest. All these definitions have been severely criticised. I suggest that underneath these traditional concepts of corruption lurks a much older one based on distributive justice – namely the ‘impartiality principle’, whereby a state ought to treat equally those who deserve equally. This principle provides a much more plausible reason for why the public condemns corruption than alternative approaches, and, moreover, it is recognised fairly universally: the implicit distinction between ‘public’ and ‘private’ is certainly neither as ‘modern’ nor as ‘Western’ as many have claimed. The universality of the principle of impartiality does not imply universality of its content: who deserves equally, or, alternatively, on which grounds discrimination is ruled out, will be answered differently at different periods in time and will vary from society to society. The impartiality principle provides a starting point for the discussion of both corruption in ‘traditional’ societies and contemporary political corruption – corruption involving violations of specific non-discrimination norms governing the access to the political process and the allocation of rights and resources. The impartiality principle calls for rule-bound administration and thus underpins the public office definition of corruption. A central element of the analysis of corruption is the study of specific non-discrimination norms and their comparison across time and place. This approach leads to a significant enrichment of the concept of corruption.

2001

This article considers corruption as a breach of contract between a principal and an agent. This does not necessarily imply that corruption is immoral, for the nature of the violation actually depends on the features of the underlying contract. In this light, under many circumstances corruption turns out to be a rational and understandable reaction to institutional failures, which are often far from accidental. To this purpose, three different stylized institutional frameworks are analyzed: developed, undeveloped and transition countries. Contrary to the mainstream approach to corruption, it is here argued that the origin, scope and consequences of corruption vary significantly across the different frameworks. Normative conclusions should therefore be adjusted accordingly.

CEPR Discussion Papers, 2010

This paper reviews the theories of corruption in regulated sectors to further understand the impact of corruption and the ways in which it can be reduced. The aim is to draw out the policy implications of the different theoretical approaches and to examine the support that can be garnered for such policies from empirical evidence and practice. We then attempt to draw out some of the broader lessons that can be learnt for anti-corruption policy in general.

The purpose of this paper is to apply some of the core general principles of heterodox political economy -especially with an institutional and evolutionary emphasis -to the topic of corruption as a global, regional, and national phenomenon. I start with the principle of historical specificity, where the known history of corruption processes and concepts are examined. I follow the evolution of the corruption discourse, starting with the classical scholars of ancient Greece and numerous others, who had a systemic view of the matter. I proceed through the micro-views of Roman law, to Adam Smith and others who took an individualist view of corruption, and onto the reemergence of the corruption discourse in the period between the 1970s and the 2010s. In the process, I investigate the micro-perspective, but increasingly center on the "modern classical works" on systemic corruption. Then, I present the basics of a modern institutional and evolutionary perspective on corruption through the principle of contradiction, which defines corruption as the promotion of vested interests against the common good in the form of bribery, fraud, embezzlement, state capture, nepotism, extortion, and others. Social dominance theory is applied to corruption vis-à-vis dominant and subordinate groups, and the styles of corruption activated by elites are surveyed as they gain resources, favors, and economic surplus against the interests of "common people." Finally, I scrutinize the principle of uneven development, paying special attention to four main stylized facts about corruption throughout the world in relation to (i) development patterns, (ii) corporate corruption, (iii) key sectors/nations, and (iv) inequality. Throughout the paper, I 280 Phillip Anthony O'Hara outline ways to reduce corruption and modify the structure of power to benefit the common good, socioeconomic performance, and the functioning of institutions.