Journal Article

How Business Community Institutions Can Help Fight Corruption

Avinash K. Dixit

in The World Bank Economic Review

Volume 29, issue suppl_1, pages S25-S47
Published in print June 2015 | ISSN: 0258-6770
Published online April 2015 | e-ISSN: 1564-698X | DOI: https://dx.doi.org/10.1093/wber/lhv016
How Business Community Institutions Can Help Fight Corruption

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  • Microeconomics
  • Analysis of Collective Decision-making
  • Law and Economics
  • Socialist Institutions and their Transitions
  • Other Economic Systems

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Collective action by the business community to counter corruption in the award of government licenses and contracts is analyzed, by analogy with contract enforcement institutions studied by economic historians and contract law scholars. The suggested anti-corruption institution comprises a no-bribery norm, a system to detect violations, and a multilateral ostracism penalty upon conviction in a tribunal. In combination with formal state law, a business institution of sufficient quality—probability of detection and severity of punishment—can eliminate corruption; a less good institution helps reduce it. The legal and communal institutions together achieve substantially better outcomes than either by itself.

Keywords: D02; D73; K42; P37; P48

Journal Article.  7691 words.  Illustrated.

Subjects: Microeconomics ; Analysis of Collective Decision-making ; Law and Economics ; Socialist Institutions and their Transitions ; Other Economic Systems

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