The Persistence of Corruption and Regulatory Compliance Failures: Theory and Evidence
September 1, 2003
Download PDF
More Formats on IMF eLibrary
Order a Print CopyDisclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary
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.
Subject: Corruption, Crime, Education, Environment, Legal support in revenue administration, Revenue administration, Tax evasion
Keywords: bureaucracy, corruption, enforcement regime, government politician, incumbent government, investment decision, judicial system, Legal support in revenue administration, lobbying, political instability, regime instability, rule of law, Tax evasion, WP
Pages:
33
Volume:
2003
DOI:
Issue:
172
Series:
Working Paper No. 2003/172
Stock No:
WPIEA1722003
ISBN:
9781451858594
ISSN:
1018-5941
