Corruption, Rule of Law, and Economic Efficiency: Selected Anecdotic Evidence of Bureaucratic Corruption from the Czech and Slovak Republics
MENDELU Working Papers in Business and Economics No. 13/2011
23 Pages Posted: 31 Aug 2011 Last revised: 30 Jun 2012
Date Written: August 31, 2011
Can corruption improve economic efficiency? Classical political economists argue that corruption undermines the rule of law (Smith 2001, chap 5). The modern Public Choice proponents argue that corruption might influence the efficiency of the rule of law. While Chicago Public Choice scholars model how corruption improves efficiency of the rule of law and thus the overall economic efficiency, the Virginia Public Choice models explain how corruption reduces efficiency of the rule of law and thus the overall economic efficiency. In this paper, we present a brief survey distinguishing among arguments of the Chicago Public Choice and Virginia Public Choice schools on how corruption influences economic efficiency. We present selected quasi-experimental anecdotic evidence of bureaucratic corruption from the early period of transition in the Czech and Slovak Republics to support the argument that the Virginia Public Choice explanation is more realistic because it includes the influence of bureaucratic corruption.
Keywords: Bureaucracy, corruption, economic efficiency, Chicago Public Choice, Virginia Public Choice, rent-seeking, rule of law
JEL Classification: D74, K42, P3
Suggested Citation: Suggested Citation