Measuring Governance, Corruption, and State Capture: How Firms and Bureaucrats Shape the Business Environment in Transition Economies

62 Pages Posted: 5 Jun 2001

See all articles by Daniel Kaufmann

Daniel Kaufmann

Natural Resource Governance Institute (NRGI); The Brookings Institution

Joel S. Hellman

World Bank - Governance and Public Sector Reform

Geraint Jones

Massachusetts Institute of Technology (MIT) - Department of Economics

Mark A. Schankerman

London School of Economics and Political Science; Centre for Economic Policy Research (CEPR)

Date Written: April 2000

Abstract

Recent studies have focussed on the characteristics and policies of the state to explain the extent and causes of corruption, with little attention paid to the role played by firms. Consequently, the links between corporate governance and national governance have been unexplored. This paper summarises the results of the Business Environment and Enterprise Performance Survey (BEEPS) across 20 transition economies, providing an assessment of governance and corruption from the perspective of firms. The BEEPS is part of the global World Business Environment Survey being carried out by the World Bank. The survey design permits an in-depth empirical analysis of governance and corruption, unbundling governance into its component dimensions. This allows a more detailed quantitative assessment of corruption, a more nuanced understanding of the causes of the problem and as a result a stronger foundation for policy advice. Particular attention is paid to 'state capture' by parts of the corporate sector (i.e. the propensity of firms to shape the underlying 'rules of the game' including 'purchase' of legislation and court decisions). The survey also provides measures of other dimensions of 'grand corruption', such as that related to public procurement. Typically, cross-country surveys suffer from a potential bias if firms have a tendency to systematically over- or under-estimate the extent of problems in their own country. We implement a simple method for evaluating the extent of this 'country perception bias' and find little evidence pointing to such bias in the BEEPS.

Keywords: Governance, corruption, state capture, transition economies

JEL Classification: C42,C81,D4,HO,KO,L1,L5,O1,P5,M2,PO,H4,K2

Suggested Citation

Kaufmann, Daniel and Hellman, Joel S. and Jones, Geraint and Schankerman, Mark A., Measuring Governance, Corruption, and State Capture: How Firms and Bureaucrats Shape the Business Environment in Transition Economies (April 2000). World Bank Policy Research Working Paper No. 2312. Available at SSRN: https://ssrn.com/abstract=236214

Daniel Kaufmann (Contact Author)

Natural Resource Governance Institute (NRGI) ( email )

80 Broad Street
New York, NY 10004
United States

HOME PAGE: http://www.resourcegovernance.org

The Brookings Institution ( email )

1775 Massachusetts Avenue, NW
Washington, DC 20036
United States

HOME PAGE: http://www.brookings.edu/experts/kaufmannd

Joel S. Hellman

World Bank - Governance and Public Sector Reform ( email )

1818 H Street
Washington, DC 20433
United States

Geraint Jones

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
E52-391
Cambridge, MA 02142
United States

Mark A. Schankerman

London School of Economics and Political Science ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 7518 (Phone)
+44 20 7831 1840 (Fax)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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