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Macroeconomic Analysis of Corruption in Developing Economies

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  • James P. Gander

Abstract

Based on empirical data, a two-equation game-type corruption reaction function model was developed. A data to model approach was used rather than the usual a priori approach. The general hypothesis tested was the monkey see, monkey do principle. The latest data on corruption among developing countries was obtained from the Enterprise Surveys done by the World Bank Group in 2010. The key variables were the percent of domestic firms expecting to make informal payment to public officials to get things done, and the percent of foreign firms doing like wise. The time span is from 2002-2010. A variety of econometric methods were used. In general, the statistical results were quite good and supported the hypothesis. Both reaction equations were positively sloped. Time had a reducing effect on the frequency of domestic corruption, yet it had an increasing effect on foreign corruption. Variations in the frequency of corruption across regions of countries were generally not significant.

Suggested Citation

  • James P. Gander, 2011. "Macroeconomic Analysis of Corruption in Developing Economies," Working Paper Series, Department of Economics, University of Utah 2011_02, University of Utah, Department of Economics.
    • Handle: RePEc:uta:papers:2011_02
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    References listed on IDEAS

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    1. Menezes, Flavio Marques, 2000. "The microeconomics of corruption: the classical approach," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 405, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
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    5. Rose-Ackerman, Susan, 1975. "The economics of corruption," Journal of Public Economics, Elsevier, vol. 4(2), pages 187-203, February.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Firm; Corruption; Game Model; Developing Countries JEL Classification: C51; D81; E60; K49; M29;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • K49 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Other
    • M29 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Other

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