The Political Economy of Corruption and and the Role of Financial Institutions

Christa Hainz and Kira Boerner

No 6, Proceedings of the German Development Economics Conference, Kiel 2005 from Verein für Socialpolitik, Research Committee Development Economics

Abstract: In transition and developing countries, we observe rather high levels of corruption even they have democratic political systems. This is surprising from a political economy perspective, as a majority of the people generally suffers from high corruption levels. Our model based on the fact that corrupt officials have to pay an entry fee to get lucrative positions. In a probabilistic voting model, we show that a lack of financial institutions can lead more corruption as more voters are part of the corrupt system. Well-functioning financial institutions, in turn, can increase the political support for anti-corruption measures.

Keywords: Corruption; Financial Markets; Institutions; Development; Voting (search for similar items in EconPapers)
JEL-codes: D72 D73 O17 (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-cdm, nep-dev, nep-fmk and nep-pol
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:gdec05:3479

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