The Persistence of Corruption and Regulatory Compliance Failures: Theory and Evidence

By Per G. Fredriksson, Muthukumara Mani, Richard Damania

September 1, 2003

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Per G. Fredriksson, Muthukumara Mani, and Richard Damania. The Persistence of Corruption and Regulatory Compliance Failures: Theory and Evidence, (USA: International Monetary Fund, 2003) accessed December 22, 2024

Disclaimer: 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

Publication Details

Pages:

33
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2003/172
Stock No:

WPIEA1722003
ISBN:

9781451858594
ISSN:

1018-5941

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