Corruption in state administration

Tina Søreide and Susan Rose-Ackerman (2018)

Søreide, Tina and Rose-Ackerman, Susan. (2018). Corruption in state administration. In J. Arlen & N. Z. Paige, Research handbook on corporate crime and financial misdealing (pp. 195-217). Cheltenham, UK: Edward Elgar Publishing.

Corruption can arise in any bureaucracy
that has the authority to allocate benefits and impose costs. Program designers need to acknowledge and control such risks, but “best practice solutions” are seldom obvious. International development institutions propose long lists of anticorruption initiatives for state bureaucracies, hoping that at least some will be effective. But effective solutions in one context may be entirely ineffective in another. Nevertheless, general economic principles can help guide reform so long as they are interpreted in the light of each country’s particular situation.

We turn for policy insight to models of bureaucratic behavior, especially the economic literature on asymmetric information and sanctions. In this literature, individuals are expected to make rational choices given their preferences and the limited information at their disposal. However, scholars often present these models abstractly without a discussion of how they interact with the law and with bureaucratic realities. We respond to that weakness by providing the intuitions behind the economic theories and discussing their practical value in anticorruption policy design. We show how insights from economic theory can elucidate efforts to deter corruption in administrative hierarchies.

The chapter proceeds as follows. Section 2 shows how economic insights can contribute to understanding the nature and prevalence of corruption. Section 3 argues that economic principles can help reformers move from understanding to control of corruption. Section 4 discusses alternative policies to deter civil servants from engaging in corruption. Section 5 evaluates compliance regimes for state institutions and the available sanctions. A conclusion follows.