Susan Rose-Ackerman

The economics of corruption

Abstract This paper considers the relationship between market structure and the incidence of corrupt dealings in the government contracting process. Three cases are analyzed. We first deal with a situation in which government preferences are well-defined and many firms compete for the contract; we then contrast this case with one in which government preferences are ‘vague’ and finally eliminate the competitive assumption to consider the case of bilateral monopoly. It is then possible to consider the extent to which various criminal sanctions will deter corruption and the degree to which criminal incentives can be reduced by revising contracting procedures and reorganizing market structures.

Electoral Rules and Constitutional Structures as Constraints on Corruption

Electoral rules and constitutional structures can influence the level of political corruption. We show that proportional representation (PR) systems are more susceptible to corrupt political rent-seeking than plurality systems. We argue that this result depends on the different loci of rents in PR and plurality systems, and on the monitoring difficulties faced by both voters and opposition parties under PR. We also examine the interaction between electoral rules and presidentialism. We test our main predictions and interaction effects on a cross-section of up to ninety-four democracies. The empirical findings strongly support our hypothesis that PR systems, especially together with presidentialism, are associated with higher levels of corrupt political rent-seeking.

Charitable Giving and “Excessive” Fundraising

Recently, some charities have been attacked for spending an “excessive†portion of their resources on fundraising. This paper shows how competition for donations can push fundraising shares to high levels even when donors dislike charities that spend a large portion of receipts on fundraising. It also considers a case in which donors take account of the productivity of fundraising in generating gifts from others. In the light of the models developed in the paper, a variety of regulatory strategies are assessed from the dissemination of information to the establishment of a federated fund drive.

Foreign Direct Investment and the Business Environment in Developing Countries: The Impact of Bilateral Investment Treaties

Bilateral Investment Treaty???s effects on FDI and the domestic business environment remain unexplored despite the proliferation of treaties over the past several years. This paper asks whether BITs stimulate FDI flows to host countries, and if the treaties have any impact on the environment for domestic private investment. We find a weak relationship between BITs and FDI. However, for risky countries, BITs attract greater amounts of FDI. We also find a weak relationship between BITs and the domestic investment environment. Thus, while BITs may not alter the domestic investment environment, they also may not be fulfilling their primary objective.

Trust, Honesty, and Corruption: Reflection on the State-Building Process

Honesty and trust affect the functioning of the state and the market, and, conversely, the quality of formal rules and institutions has an impact on interpersonal trust. This paper organizes and critiques research on the relationship between trust and government; it stresses the mutual interaction between trust and democracy and the impact of corruption. Given this context, the concluding section discusses the transition process in post-socialist countries, highlighting the tensions between interpersonal trust and trust in public institutions.

Ideals versus Dollars: Donors, Charity Managers, and Government Grants

This paper demonstrates how changes in untied, lump-sum government grants or income from unrestricted endowments will affect the behavior of charities operated by managers with s trong philosophical or professional commitments. An increase in such funds will reduce the charitys accountability to private donors and lower its fund-raising activities. The grant will not be spent entire ly on raising the quantity of output. Instead, it will permit the cha rity manager to reduce his or her dependence on the costly solicitati on of donors who do not completely share the managers preferences. Copyright 1987 by University of Chicago Press.

Market models of local government: Exit, voting, and the land market

Abstract This paper explores linkages between exit, voting, and the land market that are central to the study of local politics. It raises new questions about the desirability of Tiebout-type governmental structures. Decentralized political and locational choice may not produce an equilibrium solution, and when an equilibrium does exist, the outcome will be dependent upon the historical accidents of community size. The effect of migration on public choices depends on the preferences and incomes of migrants, on the production function for public services, and on the price of land. Migration may lead to public choices that generate more migration in the same or the opposite direction.

Racism and urban structure

Abstract This paper begins the task of integrating models of racist behavior into general theories of urban land use. The paper derives equilibrium prices for a racist city and demonstrates that the city is less dense at the core, more dense in the suburbs, and covers a larger area than an unprejudiced city. A more complex theory of housing supply is then developed, and it is shown that racisms impact on the ghetto depends upon the ease with which maintenance can be reduced, the cost of replacing abandoned housing, and the nature of legal controls on housing quality.

Democracy and ‘grand’ corruption

Corruption in international business deals is especially troubling. It can produce short-term gains for some of the countrys citizens by requiring the international firm to share its profits with the corrupt rulers. In a broader perspective, however, it substitutes for tax revenues and over time can discourage investments that further economic growth. Multinational firms will still want to extract the minerals and pump the oil of corrupt countries, but investors with a choice will go elsewhere.

Does Federalism Matter? Political Choice in a Federal Republic

This paper builds upon some well-known facts about state government to generate new conclusions about social choice on the national level of a federal republic. Citizens vote against national laws that restrict their states ability to export costs but support laws that reduce the costs imposed on them. Individuals may seek to extend the laws passed in some states to the entire nation or may oppose preemptive laws because they benefit from variety. Since these motivations are absent in a unitary system, national support for a law will depend upon whether a unitary or a federal structure prevails.