Perceived corruption frequency and size of corruption in economies
Abstract
Purpose
The paper aims to develop a theoretical model to explain the exact process through which the scale effect works to create a possible wedge between a perception-based ranking like the “Corruption Perception Index (CPI) ” and the axiomatic “absolute costs of corruption”-based ranking of economies with low enforcement against corruption.
Design/methodology/approach
The paper takes into account corruption both at the “high” and “low” levels of bureaucracies, where the bribes are paid sequentially at the two levels. The bribes are endogenously determined at the equilibrium using a sequential game approach.
Findings
The paper finds that in the absence of coalition between the two levels of bureaucrats, both the absolute level of corruption and the welfare level of the economies are expected to vary inversely with the perceived corruption frequency. The paper also explores the possibility of a stable coalition between the “high” and “low” level bureaucrats and shows that with the perception of a stable coalition being formed, the negative monotonic relation between the corruption frequency and the absolute size of corruption breaks down.
Originality/value
First, the paper argues that the ranking of the economies with low enforcement against corruption on the basis of perceived corruption frequency may not reflect the ranking of the economies according to their absolute size of corruption; it points out that the perceived higher corruption frequency in an economy as reflected in CPI can be an indicator of both the lower size of “high” level corruption and absolute size of corruption in the economy. Particularly, this happens in economies where coalition between the “high” and “low” level officials does not form. Second, it identifies the exact way in which the scale effect works to create a difference in the CPI ranking and the axiomatic “absolute costs of corruption”-based ranking and explains why similar difference would exist if “absolute costs of corruption”-based ranking is derived from all the sources of hard data on corruption. Third, it explains why a stable coalition between the “high” and “low” level bureaucrats in economies with low enforcement does not usually form.
Keywords
Acknowledgements
JEL classification – D61, D73, H11, L14 The authors thank an anonymous referee of the journal for helpful comments. An earlier version of the paper was presented at the Conference on Growth and Development held at Indian Statistical Institute, Delhi in December 2011. It has benefitted from the comments from the conference participants in general and specially from Rajat Acharya, Gautam Bose, Amber Nath Ghosh, Siddhartha Mitra and Debraj Ray. The discussion with Swapnendu Bandopadhyay was helpful. However, the usual disclaimer applies.
Citation
Mukherjee, V. and Roy, A. (2014), "Perceived corruption frequency and size of corruption in economies", Indian Growth and Development Review, Vol. 7 No. 1, pp. 42-60. https://doi.org/10.1108/IGDR-05-2012-0027
Publisher
:Emerald Group Publishing Limited
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