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CORRUPTION

CORRUPTION. Transition Economies Presented By AJ Cericola. Definition of Corruption. Misuse of Power for private gain  Bribery  Extortion  Manipulation of Laws It’s all about growth…. State Capture Corruption

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CORRUPTION

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  1. CORRUPTION Transition Economies Presented By AJ Cericola

  2. Definition of Corruption • Misuse of Power for private gain  Bribery  Extortion  Manipulation of Laws It’s all about growth…

  3. State Capture Corruption  Influencing Laws, Regulations, Policies for own advantage Corruption Type 1:

  4. Administration Corruption  Intentional imposition of distortions in the prescribed implementation of existing laws Corruption Type 2:

  5. Corruption Across the Globe

  6. Corruption and Growth

  7. Corruption and Development

  8. Sectors of Corruption: Enterprise Growth • SME’s are most important for jobs, innovation, and growth 1. Labor force and new jobs 2. Less capital intensive – more labor 3. Product innovative, not process innovative 4. More financially constrained; represent 94% of business finance 5. Contribute to growth in recession more than larger firms

  9. Bribes Paid

  10. Sectors of Corruption: Investment • Much economic theory assume positive relationship between investment and growth • 4 areas Corruption affects investment: 1. Total investments 2. Size and composition of FDI 3. Size of public investment 4. Quality of decisions and projects

  11. Sectors of Corruption: Investment • Studies show that improvements in the corruption index (i.e. reduction in corruption) can increase investment GDP ratio Comparison: 1% increase in MTR on FDI = reduction of incoming FDI ~ 3.3% 1pt. increase on corruption index = reduction in the flow of FDI ~ 11%

  12. Anti-Corruption: What can be done?

  13. Case Study: Poland • 1956: Khrushchev denounces Stalin • Worker’s strike in Poznan starts market socialism and limited civil liberties • 1980: emergence of Solidarity • 1989: parliamentary political system with proportional representation • Strong public administration skills

  14. Case Study: Croatia & Slovak Republic • Advanced among Central & Eastern European countries • Nationalism • Concentration of political power • 1994: worst year of corruption for Slovak Republic and Croatia

  15. Croatia

  16. Slovak Republic

  17. Case Study: Latvia • State Capture is high • Economy is highly concentrated: political parties run close with economic interests • 1995: adoption of conflict of interest laws • 1997: Corruption Prevention Council

  18. Latvia

  19. Transparency: CPI Index

  20. After thoughts… • Why does Poland have a decreasing CPI? Do they not have an anti-corruption strategy? • Can bad infrastructure cause corruption? • Your Questions…

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