The Organization of Corruption: Political Horizons and Special Interests

46 Pages Posted: 11 Jul 2005

See all articles by Mario Gamboa-Cavazos

Mario Gamboa-Cavazos

Harvard University; AQR Capital Management, LLC

Vidal Garza-Cantu

Instituto Tecnologico y de Estudios Superiores de Monterrey (ITESM)- EGAP

Carlos E. Salinas

Harvard University - Harvard Faculty of Arts and Sciences

Date Written: May 29, 2007

Abstract

We study the form by which corruption is organized between politicians and entrepreneurs. Using a large-scale survey with data on extra-official payments, and exploiting variation in the gubernatorial office terms and in the market structure across states in Mexico, we examine the manner in which political horizons and industry concentration affect the extent of corruption. Our primary finding is a non-linear relationship between corruption and political horizons. Specifically, corruption is more intense over long and short political horizons, and less intense over intermediate ones. We associate this result with a combination of horizon and capture effects. In the first, politicians prey more intensely on firms as their window of opportunity shortens, and thus command large corruption payments. In the second, entrepreneurs tend to bribe government officials over long and feasible policy horizons, and thus increase their corruption offerings. We also find evidence of a rent effect, where firms that accrue higher rents are more sensitive to the length of political horizons. In particular, firms operating in concentrated industries pay larger bribes over long horizons and lower bribes over short horizons, uncovering their special interest nature. Our investigation underscores the importance of transparency in public-private dealings, especially in constituencies where political accountability is weak.

Keywords: Corruption, Political Organization, Industrial Organization, Political Economy

JEL Classification: D73, H10, L10, P16

Suggested Citation

Gamboa-Cavazos, Mario and Garza-Cantu, Vidal and Salinas, Carlos Emiliano, The Organization of Corruption: Political Horizons and Special Interests (May 29, 2007). Available at SSRN: https://ssrn.com/abstract=754325 or http://dx.doi.org/10.2139/ssrn.754325

Mario Gamboa-Cavazos (Contact Author)

Harvard University ( email )

Littauer Center
Cambridge, MA 02138
United States

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

Vidal Garza-Cantu

Instituto Tecnologico y de Estudios Superiores de Monterrey (ITESM)- EGAP ( email )

Mexico

HOME PAGE: http://www.itesm.mx/egap

Carlos Emiliano Salinas

Harvard University - Harvard Faculty of Arts and Sciences ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

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