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Essay on Government Corruption

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Over the last few years, the issue of corruption--the abuse of public office for private gain--has attracted renewed interest, both among academics and policymakers. There are a number of reasons why this topic has come under recent inspection. Corruption scandals have toppled governments in both major industrial countries and developing countries. In the transition countries, the shift from command economies to free market economies has created massive opportunities for the appropriation of rents, excessive profits, and has often been accompanied by a change from a well-organized system of corruption to a more chaotic and deleterious one. With the end of the cold war, donor countries have placed less …show more content…

Since the ultimate source of rent-seeking behavior is the availability of rents, corruption is likely to occur where restrictions and government intervention lead to the presence of such excessive profits. Examples include trade restrictions such as tariffs and import quotas, industrial policies such as subsidies and tax deductions, price controls, multiple exchange rate practices and foreign exchange allocation schemes, and government-controlled provision of credit. Some rents may arise in the absence of government intervention, as in the case of natural resources, such as oil, whose supply is limited by nature and whose extraction cost is far lower than its market price. Since abnormal profits are available to those who extract oil, officials who allocate extraction rights are likely to be offered bribes. Finally, one would expect that corruption is more likely to take place when civil servants are paid very low wages and often must resort to collecting bribes in order to feed their families.
While all of the hypotheses described above are empirically testable, in the sense that data are available for that purpose, only a few have actually been tested. What empirical studies have been done support certain hypotheses: namely, that there is less corruption where there are fewer trade restrictions; where governments do not engage in favoritist industrial policies; and perhaps where

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