National Champions and Corruption: Some Unpleasant Interventionist Arithmetic

Alberto Ades and Rafael Di Tella

Economic Journal, 1997, vol. 107, issue 443, 1023-42

Abstract: The authors present a hold-up model of investment where active industrial policy promotes both corruption and investment. Since corruption deters investment, the effect of industrial policy on investment is lower than when corruption is absent. They find evidence suggesting that corruption is indeed higher in countries pursuing active industrial policies. Policy implications are illustrated by decomposing the total effect of industrial policy into a positive, direct effect, and a negative, corruption-induced effect. In the presence of corruption, the total effect of industrial policy on investment ranges between 84 and 56% of the direct impact. The magnitude of these corrections suggests that corruption considerations should not be absent from cost-benefit analyses of industrial policies. Copyright 1997 by Royal Economic Society.

Date: 1997
References: Add references at CitEc
Citations: View citations in EconPapers (192)

Downloads: (external link)
http://links.jstor.org/sici?sici=0013-0133%2819970 ... 0.CO%3B2-9&origin=bc full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecj:econjl:v:107:y:1997:i:443:p:1023-42

Ordering information: This journal article can be ordered from
http://www.blackwell ... al.asp?ref=0013-0133

Access Statistics for this article

Economic Journal is currently edited by Martin Cripps, Steve Machin, Woulter den Haan, Andrea Galeotti, Rachel Griffith and Frederic Vermeulen

More articles in Economic Journal from Royal Economic Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing () and Christopher F. Baum ().