Stephen Knack

Gender and Corruption

Using several independent data sets, we investigate an aspect of corruption that has received little attention: its differential incidence by gender. We show using micro data that women are less involved in bribery, and are less likely to condone bribe taking. Cross-country data show that corruption is less severe where women comprise a larger share of the labor force, and where women hold a larger share of parliamentary seats.

Foreign Aid, Institutions, and Governance in Sub‐Saharan Africa*

Introduction More than a decade ago, the World Bank argued that “underlying the litany of Africa’s development problems is a crisis of governance.” Poor quality institutions, weak rule of law, an absence of accountability, tight controls over information, and high levels of corruption still characterize many African states today. Aid levels have been reduced in many parts of Africa during the past decade. Yet in many of the countries with poor governance records, aid continues to contribute a very high percentage of government budgets. This article explores the institutional impact of these high levels of aid and the way that large amounts of aid are delivered. There are many reasons why governance is poor in much of sub-Saharan Africa. Colonialism did little to develop strong, indigenously rooted institutions that could tackle the development demands of modern states. Economic crisis and unsustainable debt, civil wars, and political instability have all taken their toll over the past 2 decades and more. It is difficult to separate the impact of these problems from the possible impact of foreign aid, which is often high in countries that suffer from precisely these problems. Theory provides conflicting guidance here. On the one hand, aid can release governments from binding revenue constraints, enabling them to strengthen domestic institutions and pay higher salaries to civil servants. Aid can provide training and technical assistance to build legal systems and accounting offices. In many countries, aid personnel (sometimes expatriate) manage important government programs, and the infusion of resources and technical assistance can give an important boost to the efficiency and effectiveness of governance, if only in a partial sense. Yet despite these likely benefits, it is also possible that, continued over

Aid Dependence and the Quality of Governance: Cross-Country Empirical Tests

Aid dependence can potentially undermine the quality of governance and public sector institutions by weakening accountability, encouraging rent-seeking and corruption, fomenting conflict over control of aid funds, siphoning off scarce talent from the bureaucracy, and alleviating pressures to reform inefficient policies and institutions. Analyses of cross-country data in this paper provide evidence that higher aid levels erode the quality of governance, as measured by indices of bureaucratic quality, corruption, and the rule of law. These findings support the need for donors to develop less costly and less intrusive ways of disseminating state-of-the-art knowledge on public sector reform in developing countries.

Social capital and the quality of Government : evidence from the U.S. States

Social capital - in the form of general trust and strong civi norms that call for cooperation when large-scale collective action is needed - can improve government performance in three ways: 1) It can broaden government accountability, making government responsive to citizens at large, rather than to narrow interests. 2) It can facilitate agreement where political preferences are polarized. 3) It is associated with greater innovation when policymakers face new challenges. Consistent with these arguments, Putnam (1993) has shown that regional governments in the more trusting, more civic-minded northern, and central parts of Italy provide public services more effectively than do those in the less trusting, less civic-minded southern regions. Using cross-country data, La Porta and others (1997), and Knack and Keefer (1997), obtained findings consistent with Putnams evidence. For samples of about thirty nations (represented in the World Value Surveys), they found that societies with greater trust tended to have governments that performed significantly better. The authors used survey measures of citizen confidence in government as well as subjective indicators of bureaucratic inefficiency. The author further analyzes links between social capital and government performance, using data for the United States. In states with more social capital (as measured by an index of trust, volunteering, and census response), government performance is rated higher, based on ratings constructed by the Government Performance Project. This result is highly robust to including a variety of control variables, considering the possibility of influential outlying values, treating the performance ratings as ordinal, rather than cardinal, and correcting for possible endogeneity.

Polarization, Politics and Property Rights: Links between Inequality and Growth

We argue that social polarization reduces the security ofproperty and contract rights and, through this channel,reduces growth. The first hypothesis is supported by cross-country evidence indicating that polarization in the form ofincome inequality, land inequality, and ethnic tensions isinversely related to a commonly-used index of the security ofcontractual and property rights. When the security of propertyrights is controlled for in cross-country growth regressions,the relationship between inequality and growth diminishesconsiderably. This and other evidence provides support for oursecond hypothesis, that inequality reduces growth in partthrough its effect on the security of property rights.

Contract-Intensive Money: Contract Enforcement, Property Rights, and Economic Performance

We introduce a new, easily accessed and objective measure of the enforceability of contracts and the security of property rights. This measure, called “contract-intensive money” or CIM, is based on citizens’ decisions regarding the form in which they choose to hold their financial assets. Country case studies show that CIM varies over time in response to political events in ways predicted by our arguments. We also show that CIM is positively related to investment and growth rates, and to the relative size of contract-dependent sectors of the economy.

The Worldwide Governance Indicators: Six, One, or None?

Abstract Aggregate indexes of the quality of governance, covering large samples of countries, have become popular in comparative political analysis. Few studies examine the validity or reliability of these indexes. To partially fill this gap, this study uses factor, confirmatory factor and path analysis to test both measurement and causal models of the six Worldwide Governance indicators. They purportedly measure distinct concepts of control of corruption, rule of law, government effectiveness, rule quality, political stability, and voice and accountability. Rather than distinguishing among aspects of the quality of governance, we find that they appear to be measuring the same broad concept.

Groups, Growth and Trust: Cross-Country Evidence on the Olson and Putnam Hypotheses

Olson (1982) and Putnam (1993) providesharply conflicting perspectives on theimpact of private associations on economicwell-being and social conflict. Olson(1982) emphasized their propensity to actas special interest groups that lobby forpreferential policies, imposingdisproportionate costs on the rest ofsociety. Putnam (1993) viewed membershipsin horizontal associations as a source ofgeneralized trust and social ties conduciveto governmental efficiency and economicperformance. Using cross-country data,this paper investigates the impact ofassociational memberships on generalizedtrust and economic performance, findinglittle support for Olsons view of theimpact of groups, and only mixed supportfor the Putnam perspective.

Building Trust: Public Policy, Interpersonal Trust, and Economic Development

We have previously shown that interpersonal trust substantially impacts economic growth, and that sufficient interpersonal trust is necessary for economic development. To investigate the ability of policy-makers to affect trust levels, this paper builds a formal model characterizing public policies that can raise trust. The model is used to derive optimal funding for trust-raising policies when policy-makers seek to stimulate economic growth. Policies examined include those that increase freedom of association, build civic cultures, enhance contract enforcement, reduce income inequality, and raise educational levels. Testing the models predictions, we find that only freedom, redistributive transfers, and education efficiently and robustly stimulate prosperity. They do this by strengthening the rule of law, reducing inequality, and by facilitating interpersonal understanding, all of which raise trust.

Aid Dependence and the Quality of Governance : A Cross-Country Empirical Analysis

Good governance -- in the form of institutions that establish predictable, impartial, and consistently enforced rules for investors -- is crucial for the sustained and rapid growth of per capita incomes in poor countries. Aid dependence can undermine institutional quality by weakening accountability, encouraging rent seeking and corruption, fomenting conflict over control of aid funds, siphoning off scarce talent from the bureaucracy, and alleviating pressures to reform inefficient policies and institutions. The authors analyses of cross-country data provide evidence that higher aid levels erode the quality of governance, as measured by indexes of bureaucratic quality, corruption, and the rule of law. This negative relationship strengthens when instruments for aid are used to correct for potential reverse causality. It is robust to changes in the sample and to several alternative forms of estimation. Recent studies have concluded that aids impact on economic growth and infant mortality is conditional on policy and institutional gaps. The authors results indicate that the size of the institutional gap itself increases with aid levels.