2001 and Beyond: What research Directions on Corruption and governance?

1. 2001 and Beyond: What research Directions on Corruption and governance? Daniel Kaufmann, WBI The World Bank www.worldbank.org/wbi/governance Workshop Session, October 10th, 2001 10th IACC, Prague, Czech Republic Note: Some of the empirical work presented here is preliminary, and subject to a margin of error. Caution in interpretation is needed, and no precise ranking of countries is warranted.

2. What is Governance?: A working definition for public governance • Governance is the process and institutions by which authority in a country is exercised: (1) the process by which governments are selected, held accountable, monitored, and replaced; (2) the capacity of governments to manage resources efficiently, and to formulate, implement, and enforce sound policies and regulations; and, (3) the respect for the institutions that govern economic and social interactions among them

3. Operationalizing Governance: Unbundling its Definition into Components that can be measured, analyzed, and worked on Each of the 3 main components of Governance Definition is unbundled into 2 subcomponents: • Voice and Accountability • Political Stability and lack of Violence • Quality Regulatory Framework • Government Effectiveness • Control of Corruption • Rule of Law

4. Control of Corruption: Aggregate Indicator (selected countries from 155 worldwide, for illustration, based on 1998 research data*) POOR GOOD Source: ‘Governance Matters’, PRWP 2196 by Kaufmann, Kraay and Zoido. http://www.worldbank.org/wbi/governance/

5. Per Capita Income and Infant Mortality and Corruption Regulatory Burden 12,000 90 80 10,000 70 8,000 60 50 6,000 40 4,000 30 20 2,000 10 0 0 Weak Average Good Weak Average Good Development Regulatory Burden Control of Corruption Development x x Dividend Dividend Literacy and Rule of Law Per Capita Income and Voice and Accountability 100 10000 9000 8000 75 7000 6000 50 5000 4000 3000 25 2000 1000 0 0 Weak Average Good Weak Average Strong Development Development Rule of Law x x Voice and Accountability Dividend Dividend The ‘Dividend’ of Good Governance Note : The bars depict the simple correlation between good governance and development outcomes. The line depicts the predicted value when taking into account the causality effects (“Development Dividend”) from improved governance to better development outcomes. For data and methodological details visit http://www.worldbank.org/wbi/governance.

6. Control of Graft and Freedom of the Press High Control of Graft [kkz] r = .68 Low Low High Freedom of the Press (Freedom House)

7. Enormous Social/Economi costs of state capture: Much lower growth in sales and investment in economy(and also weaker property rights protection)

8. Transnational Corporate Responsibility Matters as Well: % of firms that 'Purchase' Legislation and Decrees in Transition Economies 12% 10% 8% % firms 'purchase' legislative 6% 4% 2% Domestic With Investor FDI Note: For transition economies, average of 20 countries. Source: Hellman, Jones and Kaufmann, 2000 (www.worldbank.org/wbi/governance)

9. State Capture exists where partial Civil Liberties and slow Economic Reforms Economic Reforms Degree of Civil Liberties in Transition Economies

10. Business Associations Constrains State Capture and Grand Corruption

11. Citizen Voice Improves Accessibility of Public Services to the Poor Based on Public Officials Survey. The sample of institutions includes 44 national, departmental, and municipal agencies which are a prior anticipated to be accessible to the poor

12. Citizen Voice Helps Control Bribery in LAC country Based on 90 national, departmental, and municipal agencies covered in the Bolivia Public Officials Survey.

13. Transparency within Government Agencies Prevents Purchase of Public Positions Based on 90 national, departmental, and municipal agencies covered in the Public Officials Survey.

14. Which Governance Characteristics Matter for Agency Performance? Results from Bolivia Public Officials

15. Lower Income Households ‘Pay’ Disproportionally Bribe/Total Income ratio % ( A Latin American Country )

16. Corruption Potential in Typical Privatization Transaction Structures* * Note: “-” and “-” equal low and very low corruption potential, respectively. “+” and “++” equal high and very high corruption potential, respectively.

17. The Impact of Privatization Structures on Corruption in the Post-Privatization Environment* * Note: “-” and “-” equal low and very low corruption potential, respectively. “+” and “++” equal high and very high corruption potential, respectively.

18. The Privatization Process and Impact on Corruption(Average for 16 Transition Economies – ’96 Expert Survey Results, N=50) Incidence on Corruption Privatization Program Characteristics GOOD POOR

19. Monopolies and Corruption

20. Towards a Solution: Improve Institutional Quality – e.g. Courts

21. Research: Data power and concreteness Challenge of Localizing: micro-level research Agency-specific research (eg courts, municip) Unbundling governance and corruption: specifics, components, links among them Data & Empirical Power & nexus w/ poverty Public Officials a key source of information Grand corruption & State Capture: empirics Integrating Corporate Governance with National Governance challenge Voice, Participation: analytics, facts, rigour