The Persistence of Corruption and Regulatory Compliance Failures Theory and Evidence

34 Pages Posted: 3 Feb 2006

See all articles by Richard Damania

Richard Damania

World Bank; University of Adelaide - School of Economics

Per G. Fredriksson

University of Louisville - College of Business - Department of Economics; Institute for Corruption Studies

Muthukumara Mani

World Bank

Date Written: September 2003

Abstract

This paper examines the reasons why corruption and policy distortions tend to exhibit a high degree of persistence in certain regimes. We identify circumstances under which a firm seeks to evade regulations by (1) bribing of local inspectors and (2) lobbying high-level government politicians to resist legal reforms designed to improve judicial efficiency and eliminate corruption. The analysis predicts that in politically unstable regimes the institutions necessary to monitor and enforce compliance are weak. In such countries corruption is more pervasive and the compliance with regulations is low. The empirical results support the predictions of the model.

Keywords: corruption rule of law lobbying political instability bureaucracy

JEL Classification: D72 D78 Q28

Suggested Citation

Damania, Richard and Fredriksson, Per G. and Mani, Muthukumara, The Persistence of Corruption and Regulatory Compliance Failures Theory and Evidence (September 2003). IMF Working Paper, Vol. , pp. 1-34, 2003. Available at SSRN: https://ssrn.com/abstract=880220

Richard Damania (Contact Author)

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

University of Adelaide - School of Economics ( email )

Adelaide SA, 5005
Australia
+61 8 8303 4933 (Phone)
+61 8 8223 1460 (Fax)

Per G. Fredriksson

University of Louisville - College of Business - Department of Economics ( email )

Louisville, KY 40292
United States

Institute for Corruption Studies

Stevenson Hall 425
Normal, IL 61790-4200
United States

Muthukumara Mani

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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