Combating Corruption: On the Interplay between Institutional Quality and Social Trust

34 Pages Posted: 29 Apr 2008

See all articles by Christian Bjørnskov

Christian Bjørnskov

Aarhus University - Department of Economics and Business; Research Institute of Industrial Economics (IFN); Center for Political Studies; Institute for Corruption Studies

Date Written: 28 April 2008

Abstract

The aim of this paper is to explore under which conditions institutional quality leads to lower corruption. A model of a simple economy where firms both chose between bribing or not bribing bureaucrats to avoid costs and between entering the official or unofficial economy shows that the effects of increasing institutional quality may be ambiguous due to perverse effects of institutions in the unofficial economy. Employing a recent index of corruption based on objective data, the paper shows that formal institutions are more effective in combating corruption in countries with high levels of social trust. The paper concludes by discussing the welfare and political implications of the findings.

Keywords: Corruption, Rent-seeking, Social trust

JEL Classification: D72, K42, Z13

Suggested Citation

Bjørnskov, Christian, Combating Corruption: On the Interplay between Institutional Quality and Social Trust (28 April 2008). Available at SSRN: https://ssrn.com/abstract=1126228 or http://dx.doi.org/10.2139/ssrn.1126228

Christian Bjørnskov (Contact Author)

Aarhus University - Department of Economics and Business ( email )

Fuglesangs Allé 4
Aarhus V, DK-8210
Denmark

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Center for Political Studies

Landgreven 3
Copenhagen K, DK-1301
Denmark

Institute for Corruption Studies

Stevenson Hall 425
Normal, IL 61790-4200
United States

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