Hold Your Nose and Vote: Why Do Some Democracies Tolerate Corruption?

IMF Working Papers, April 1, 2009

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Analyzes why corruption can persist for long periods in a democracy and whether persistence can result from a well-informed rational choice of citizens.
Applies a citizen-candidate model of representative democracy to study how corruption affects policy choices.

Corruption distorts the allocation of resources between public and private expenditure, altering policy preferences of elected and nonelected citizens in opposite directions.
The distortion leads to:
- A reduction in real public expenditure.
- If the median voter's demand for public goods is sufficiently elastic, a tax reduction.
Under the condition of sufficiently elastic median-voter demand for public goods, some citizens can indirectly benefit from corruption.

If citizens anticipate a future shift in policy preferences toward higher public expenditure, they may support institutional arrangements that favor corruption (for example, weak enforcement of the law) to influence future policy decisions in their favor.
This strategic support for weak institutional enforcement complements other explanations that attribute persistence of corruption to failures by voters or the electoral system.

Findings bear on developing effective anticorruption strategies by highlighting incentives that can make citizens tolerate or even support corrupt arrangements.
Results have implications for redefining the role that can be played by the international community in anticorruption efforts.

Subject: Budget planning and preparation, Corruption, Expenditure, Political economy, Tax incentives
Keywords: consumer goods, international community, mover accent, public expenditure, tax revenue, WP

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