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The Transition of Corruption - Institutions and dynamics

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  • Martin Paldam

    (Department of Economics and Business Economics, University of Aarhus)

Abstract

The cross-country data for honesty/corruption and income has a correlation of about 0.75, and the data have a typical transition path; but the correlation of the growth rate and honesty is negative. Thus, the short and long-run findings are contradictory, and it is shown that the contradiction lasts a dozen years. The transition of corruption happens relatively late and works through changes in institutions. To catch all institutions the Polity-index is used for the political dimension and the Fraser-index of economic freedom for the economic one. The two indices explain as much as income, but they both have a transition, so the relations are partly spurious. To identify the non-spurious part of the relation and sort out causality, the D-index is defined as the difference between the corruption index and the transition path. Institutional instability increases corruption, but when institutions stabilize, both democracy and economic freedom increase honesty.

Suggested Citation

  • Martin Paldam, 2019. "The Transition of Corruption - Institutions and dynamics," Economics Working Papers 2019-06, Department of Economics and Business Economics, Aarhus University.
    • Handle: RePEc:aah:aarhec:2019-06
    as

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    File URL: https://repec.econ.au.dk/repec/afn/wp/19/wp19_06.pdf
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    References listed on IDEAS

    as
    1. Lambsdorff,Johann Graf, 2007. "The Institutional Economics of Corruption and Reform," Cambridge Books, Cambridge University Press, number 9780521872751, January.
    2. J. Behrman & T.N. Srinivasan (ed.), 1995. "Handbook of Development Economics," Handbook of Development Economics, Elsevier, edition 1, volume 3, number 4.
    3. Hollis Chenery† & T.N. Srinivasan (ed.), 1989. "Handbook of Development Economics," Handbook of Development Economics, Elsevier, edition 1, volume 2, number 2.
    4. Martin Paldam & Erich Gundlach, 2016. "Jumps into democracy: The transition in the Polity Index," Economics Working Papers 2016-05, Department of Economics and Business Economics, Aarhus University.
    5. Jayasri Dutta & Toke S. Aidt (ed.), 2016. "Corruption and Economic Development," Books, Edward Elgar Publishing, number 15608.
    6. J. Behrman & T.N. Srinivasan (ed.), 1995. "Handbook of Development Economics," Handbook of Development Economics, Elsevier, edition 1, volume 3, number 3.
    7. Toke S. Aidt, 2003. "Economic analysis of corruption: a survey," Economic Journal, Royal Economic Society, vol. 113(491), pages 632-652, November.
    8. Hollis Chenery† & T.N. Srinivasan (ed.), 1988. "Handbook of Development Economics," Handbook of Development Economics, Elsevier, edition 1, volume 1, number 1.
    9. Martin Paldam & Erich Gundlach, 2018. "Jumps into Democracy: Integrating the Short and Long Run in the Democratic Transition," Kyklos, Wiley Blackwell, vol. 71(3), pages 456-481, August.
    10. Christian Bjørnskov & Martin Paldam, 2012. "The spirits of capitalism and socialism," Public Choice, Springer, vol. 150(3), pages 469-498, March.
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    Cited by:

    1. Gründler, Klaus & Potrafke, Niklas, 2019. "Corruption and economic growth: New empirical evidence," European Journal of Political Economy, Elsevier, vol. 60(C).

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    More about this item

    Keywords

    Corruption; cross-country; income vs institutions;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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