Manual Corruption, Development and the Environment

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In this context, we also scrutinize the proposition that there is an evident trade-off between market failure s and corruption. On the contrary, anticipating one of the main conclusions of this book, we argue that corruption is one of the causes of the persistence of market failure s.

The abuse of power for private gains in the case of environmental policies is an egregious example of how public institutions fail in dealing with issues that cannot be solved solely by market mechanisms because of corruption. Finally, the chapter also contains a discussion of basic concepts used throughout the book and of issues related to the measurement of corruption. We survey and assess the empirical literature on the sources of corruption. Thanks to the improved availability of data, we are able to produce a comprehensive cross-country econometric model to test well-established and more recent hypotheses jointly.

We do not find that the common law system, or a past as a British colony predicts corruption. Our results support cultural theories on the causes of corruption, and suggest that a medium-long exposure to uninterrupted democracy is associated with lower corruption levels, while political turnover tends to raise corruption. The results also suggest that the diffusion of newspapers helps to lower corruption levels.

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Through growth regression analysis, we estimate the direct effect of corruption on economic growth and the indirect transmission channels, specifically, investments, trade policy , schooling , and political violence. We find that one-standard deviation increase in the corruption index is associated with a substantial decrease in economic growth.

The most important channels through which corruption effects economic growth are investment , followed by schooling and trade openness. Theoretical and empirical studies have shown that democracy and corruption influence environmental policies. In this chapter, we empirically analyse the relative importance of these determinants of environmental policy.

When these variables are jointly included as explanatory variables in a multiple regression analysis, we find that corruption stands out as a substantial and significant determinant of environmental policies, while proxies for democracy have an insignificant impact. Nevertheless, democracy could affect environmental policy stringency given that countries with a history of democratic rule tend to be less corrupt see Chap.

A discussion of our results in the context of the Environmental Kuznets Curve literature follows.

Corruption levels of countries and progress on ensuring environmental sustainability

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Corruption and Development: A primer

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