Corruption & Redefining the Role of the State

Lecture # 17

Week 12

“…the traditional way of viewing the state in Latin America was subject to a paradox. It was both omnipresent and extremely weak…….” Franko (2007)

Structure of this class

• New way of looking at the state and corruption in Latin America

Two questions

• What is the link between corruption and political regimes?

• How can corruption been fought against in the recent past?

New way of looking at the state and corruption in Latin America

• Early literature emphasized the notion of a “benevolent state” acting in the interest of society

• More recently, state perceived as acting in the interest of groups and government officials

A minimalist view:

A government should not go very far in the production ofgoods, and services outside the social, administrative, andsecurity sectors

Link between corruption and political regimes (Shleifer-Vishny (1993)

Def.

Corruption: Sale by government officials of government property for personal gain

Assumptions:

• Government produces a homogeneous good. The demand for this good is D(p)

• A government official can restrict the supply of this good. No punishment

• The government official “sells” the good to the consumers. And the difference between the price he charges and the cost at which he acquired the good is called a “bribe”

• Government officials are monopolists. Their objective function is tomaximize the value of bribes.

Recent estimates from the World Bank suggest…

How can corruption be fought against in the recent past (Franko (2007)

Next class: Agriculture, Poverty and Inequality (consult syllabus pls)