The Institutional Economics of Corruption and Reform: Theory, Evidence and Policy

Corruption has been a feature of public institutions for centuries yet only relatively recently has it been made the subject of sustained scientific analysis. Lambsdorff shows how insights from institutional economics can be used to develop a better understanding of why corruption occurs and the best policies to combat it. He argues that rather than being deterred by penalties, corrupt actors are more influenced by other factors such as the opportunism of their criminal counterparts and the danger of acquiring an unreliable reputation. This suggests a novel strategy for fighting corruption similar to the invisible hand that governs competitive markets. This strategy - the ‘invisible foot’ - shows that the unreliability of corrupt counterparts induces honesty and good governance even in the absence of good intentions. Combining theoretical research with state-of-the-art empirical investigations, this book will be an invaluable resource for researchers and policy-makers concerned with anti-corruption reform.

• Provides a novel approach to anti-corruption • Links reform to evidence using state-of-the-art empirical research • Numerous case studies delve into the real world of corruption

Acknowledgements; A roadmap to this book; 1. Introduction; 2. Enemies of corruption; 3. What is bad about bureaucratic corruption? An institutional economic approach; 4. The dilemma of the kleptocrat: what is bad about political corruption?; 5. Corruption and transactions costs: the rent-seeking perspective; 6. Making corrupt deals: contracting in the shadow of the law; 7. Exporters’ ethics and the art of bribery; 8. How confidence facilitates illegal transactions: an empirical approach; 9. Corrupt relational contracting; 10. Concluding thoughts; Annex: Technical details to the Transparency International Corruption Perceptions Index; References; Index.

From the hardback review: \'Lambsdorff provides a sound institutional economic analysis of corruption and possible reforms. This book will improve our understanding of the difficult topic of corruption and will help policy makers to better cope with its consequences. It will be the standard treatment of this subject for many years to come.\' Friedrich Schneider, Professor of Economics, Johannes Kepler University of Linz

From the hardback review: \'Johann Graf Lambsdorff has spearheaded research on anti-corruption over the last decade…In his new book he gives novel insights into corruption and anti-corruption … this book is sure to further motivate and initiate the fight against corruption as well as to provide inspiration to academics and practitioners.\' Peter Eigen, Founder and Chairman of the Board of Transparency International

From the hardback review: ‘In this valuable book, Johann Graf Lambsdorff, developer of Transparency International\'s Corruption Perceptions Index, brings his vast knowledge to the task of understanding and combating corruption. Economists usually study the incentives to pay and receive bribes; they recommend strategies of prevention and transparency. Lambsdorff, in contrast, emphasizes the structure of the corrupt deal itself. Corrupt actors face the risk of betrayal; hence, reform should seek to make betrayal more likely. His conclusions support law enforcement techniques that reward the corrupt for supplying information as well as measures that make communication between officials and clients difficult and costly. With his distinctive perspective, Lambsdorff has made an important contribution to the field of corruption studies.’ Susan Rose-Ackerman, Henry R. Luce Professor of Law and Political Science, Yale Law School

From the hardback review: ‘Johann Graf Lambsdorff is the man behind the Corruption Index from Transparency International. It is reported – often with lurid headlines – across the world every year when it is issued. A government loves it when its country rises even a few steps up towards honesty, and the opposition and many journalists love it when their country descends even a few steps down towards corruption. With such fame and notoriety everything that is known and written about corruption descends upon Johann Graf Lambsdorff, and this book is his summary and thoughts after twelve years of the TI index. The book is first of all a detailed and thoughtful survey of the evidence and the literature. It is also a strong plea for a more honest world, with very insightful discussions of a broad range of proposals for reform.’ Martin Paldam, Professor of Economics, University of Aarhus, Denmark