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2001 and Beyond: What research Directions on Corruption and governance?
Daniel Kaufmann, WBIThe World Bank
www.worldbank.org/wbi/governance
Workshop Session, October 10th, 200110th IACC, Prague, Czech Republic
Note: Some of the empirical work presented here is preliminary, and subject to a margin of error. Caution in interpretation is needed, and no precise ranking of countries is warranted.
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What is Governance?: A working definition for public governance
• Governance is the process and institutions by which authority in a country is exercised:
(1) the process by which governments are selected, held accountable, monitored, and replaced;
(2) the capacity of governments to manage resources efficiently, and to formulate, implement, and enforce sound policies and regulations; and,
(3) the respect for the institutions that govern economic and social interactions among them
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Operationalizing Governance: Unbundling its Definition into Components that
can be measured, analyzed, and worked on
Each of the 3 main components of Governance Definition is unbundled into 2 subcomponents:
• Voice and Accountability• Political Stability and lack of Violence• Quality Regulatory Framework• Government Effectiveness• Control of Corruption• Rule of Law
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Control of Corruption: Aggregate Indicator (selected countries from 155 worldwide, for illustration,
based on 1998 research data*)
Source: ‘Governance Matters’, PRWP 2196 by Kaufmann, Kraay and Zoido. http://www.worldbank.org/wbi/governance/
POORGOOD
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The ‘Dividend’ of Good Governance
Infant Mortality and Corruption
0
10
20
30
40
50
60
70
80
90
Weak Average Good
Control of Corruption x Development Dividend
0
2,000
4,000
6,000
8,000
10,000
12,000
Weak Average Good
Regulatory Burdenx Development Dividend
Per Capita Income and Regulatory Burden
Literacy and Rule of Law
0
25
50
75
100
Weak Average Good
Rule of Law x Development Dividend
Per Capita Income and Voice and Accountability
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
Weak Average Strong
Voice and Accountabilityx DevelopmentDividend
Note: The bars depict the simple correlation between good governance and development outcomes. The line depicts thepredicted value when taking into account the causality effects (“Development Dividend”) from improved governance to betterdevelopment outcomes. For data and methodological details visit http://www.worldbank.org/wbi/governance.
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AGOALB
AREARG
ARM
AUSAUT
AZE
!
BEN
BFABGDBGR
BHR
BHS
BIHBLR
BOL
BRABRN
BWA
CANCHE
CHL
CHNCIV
CMR
COGCOL
CRICUB
CYP
CZE
DEU
DNK
DOMDZA ECU
EGY
ESP
EST
ETH
FIN
FJI
FRA
GAB
GBR
GEO
GHA
GIN
GMBGNB
GRC
GTM
GUY
HKG
HND
HRVHTI
HUN
IDN
IND
IRL
IRN
IRG
ISL
ISR
ITA
JAMJOR
JPN
KAZKENKGZ
KOR
KWT
LBN
LBRLBY
LKALSO
LTU
LUX
LVA
MAR
MDA MDGMEX
MKD MLI
MLT
MMR
MNG
MOZ
MUS
MWI
MYSNAM
NER
NGA NIC
NLD
NOR
NZL
OMN
PAKPAN
PER PHL
PNG
POL
PRK
PRT
PRY
QAT
ROMRUSSAU
SDN
SEN
SGP
SLE
SLV
SOM
SURSVK
SVN
SWE
SWZ
SYRTCD
TGO THA
TJK TKM
TTO
TUN
TUR
TWN
TZA
UGA
UKR
URY
USA
UZBVEN
VNM
YEMYUG
ZAF
ZAR
ZMBZWE
r = 0.68-2.5
-2
-1.5
-1
-0.5
0
0.5
1
1.5
2
2.5
0 0.2 0.4 0.6 0.8 1
Control of Graft and Freedom of the Press
High
Low
Low High
r = .68
Freedom of the Press (Freedom House)
Con
trol o
f Gra
ft [k
kz]
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Enormous Social/Economi costs of state capture: Enormous Social/Economi costs of state capture: Much lower growth in sales and investment in economyMuch lower growth in sales and investment in economy
(and also weaker property rights protection)(and also weaker property rights protection)
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2%
4%
6%
8%
10%
12%
% fi
rms
'pur
chas
e' le
gisl
ativ
e
DomesticInvestor
WithFDI
% of firms that 'Purchase' Legislation and Decrees in Transition Economies
• Transnational Corporate Responsibility Matters as Well:
Note: For transition economies, average of 20 countries. Source: Hellman, Jones and Kaufmann, 2000 (www.worldbank.org/wbi/governance)
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State Capture exists where partial Civil Liberties and slow Economic Reforms
Degree of Civil Liberties in Transition Economies
EconomicReforms
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Business Associations Constrains Business Associations Constrains State Capture and Grand CorruptionState Capture and Grand Corruption
0102030405060708090
Hungary Russia Azerbaijan
Business association members
(% of firms)
Active members Nonactive members
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Citizen Voice Improves Accessibility of Public Services to the Poor
Based on Public Officials Survey. The sample of institutions includes 44 national, departmental, and municipal agencies which are a prior anticipated to be accessible to the poor
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Citizen Voice Helps Control Bribery in LAC country
Based on 90 national, departmental, and municipal agencies covered in the Bolivia Public Officials Survey.
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Transparency within Government Agencies Prevents Purchase of Public Positions
Based on 90 national, departmental, and municipal agencies covered in the Public Officials Survey.
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Which Governance Characteristics Matter for Agency Performance? Results from Bolivia Public Officials
Governance Determinant of Performance
Simple Unconditional Relationship
Conditional/Causal Relationship
‘Ethical Values’ 0 0 Agency Autonomy ** 0 Enforcement of Rules ** 0 Quality of Rules * 0 Wage Satisfaction ** 0 Politicization ** ** Internal Transparency ** ** External Voice ** ** Corruption ** **
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4.2
2.11.4
0
1
2
3
4
LowIncome
MiddleIncome
HighIncome
Lower Income Households ‘Pay’ Disproportionally
Bribe/Total Income ratio % ( A Latin American Country )
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Corruption Potential in Typical Privatization Transaction Structures*
Speed Admin. Discretion
Transparency/ Information
Independent Administration
Voucher-Based Mass Privatization
– – – -
Liquidation - - – –
Capital Market-Based Privatization
++ - - -
Tenders and Trade Sales ++ ++ - -
Management-Employee Buy-Out (MEBOs)
+ ++ ++ +
Spontaneous Privatization + ++ ++ ++
* Note: “-” and “-” equal low and very low corruption potential, respectively.“+” and “++” equal high and very high corruption potential, respectively.
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The Impact of Privatization Structures on Corruption in the Post-Privatization Environment*
Scope of Program
Residual State
Ownership
Residual Purchase
Obligations
“New” Owners
Transaction Corruption
Liquidation ++ – – – –
Voucher-Based Mass Privatization
– ++ – - –
Initial Public Offerings ++ + – – -
Tenders and Trade Sales - – ++ – +
Spontaneous Privatization – – – + ++
Management-Employee Buy-Out (MEBOs)
- – ++ ++ ++
* Note: “-” and “-” equal low and very low corruption potential, respectively.“+” and “++” equal high and very high corruption potential, respectively.
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The Privatization Process and Impact on Corruption(Average for 16 Transition Economies – ’96 Expert Survey Results, N=50)(Average for 16 Transition Economies – ’96 Expert Survey Results, N=50)
1.5 3.0 4.5
Corruption in Privatized Sectors vs. Others
Privatization Impact on Overall Cooperation
Corruption in Privatized Transactions
Corrupt Reputation of Privatization Program
Information Quality of Privatization Program
Administrative Discretion of PrivatizationProgram
Speed of Privatization Program
Inci
denc
e on
Cor
rupt
ion
Priv
atiz
atio
n Pr
ogra
m
Cha
ract
eris
tics
GOOD POOR
Monopolies and CorruptionMonopolies and Corruption
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Towards a Solution: Improve Institutional Quality – e.g. Courts
Would you describe the courts as...
"Nirvana" Estonia Latvia Lithuania
Fair
Honest
Reliable
EnforcesDecisions
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Research: Data power and concreteness• Challenge of Localizing: micro-level research• Agency-specific research (eg courts, municip)• Unbundling governance and corruption: specifics, components, links among them• Data & Empirical Power & nexus w/ poverty • Public Officials a key source of information• Grand corruption & State Capture: empirics• Integrating Corporate Governance with National Governance challenge• Voice, Participation: analytics, facts, rigour