Corruption in Developing Countries

Recent years have seen a remarkable expansion in economists' ability to measure corruption. This in turn has led to a new generation of well-identified, microeconomic studies. We review the evidence on corruption in developing countries in light of these recent advances, focusing on three questions: how much corruption is there, what are the efficiency consequences of corruption, and what determines the level of corruption? We find robust evidence that corruption responds to standard economic incentive theory but also that the effects of anticorruption policies often attenuate as officials find alternate strategies to pursue rents.Hewlett-Packard CompanyGreat Britain. Dept. for International DevelopmentMassachusetts Institute of Technology. Abdul Latif Jameel Poverty Action Lab (Governance Initiative

Bad governance:How privatization increases corruption in the developing world

International organizations have become key actors in the fight against corruption. Among these organizations, the International Monetary Fund (IMF) maintains a powerful position over borrowing countries in its ability to mandate far‐ranging policy reforms – so‐called “conditionalities” – in exchange for access to financial assistance. While IMF pressure can force the implementation of anti‐corruption policies, potentially reducing corruption, other IMF policy measures, such as the privatization of state‐owned enterprises, can create rent‐extraction opportunities and limit the capacity of state institutions to limit corrupt behavior. To test these mechanisms, we conduct instrumental‐variable regression analysis using an original dataset on IMF conditionality for up to 141 developing countries from 1982 to 2014. We find that conditions to privatize state‐owned enterprises exert significant detrimental effects on corruption control. Conversely, other areas of IMF intervention are not consistently related to corruption abatement. These findings offer policy lessons regarding the design of conditionality, which should avoid large‐scale privatization, especially under conditions of weak accountability

Identifying tax implicit equivalence scales

This is a post-peer-review, pre-copyedit version of an article published in Journal of Economic Inequality. The final authenticated version is available online at: https://doi.org/10.1007/s10888-017-9354-x© 2017, Springer Science+Business Media New York. This paper describes a simple and tractable method for identifying equivalence scales that reflect the value judgements implicit in a tax and transfer system. The approach depends on two identifying assumptions and a functional description for transfer payments that can be estimated using common publicly available data sources. We use this approach to evaluate tax implicit equivalence scales for the tax-transfer systems of 12 European countries that applied in 2012. Cross-country averages for the tax implicit scales generate a surprising set of stylised results: at low incomes, each additional household member increases the tax implicit scale by approximately 0.5, relative to 1.0 for the first adult; at high incomes, the average tax implicit scales describe variation that is remarkably similar to the modified OECD scale. However, substantial cross-country variation underlies these average scales, suggesting important differences in value judgements implicit in the respective tax-transfer systems; differences that can otherwise be difficult to discern when systems are complex and opaque