Corruption Essay

1973 words - 8 pages

The Effects of Corruption and Economic Growth
Cassandra Rogers

Economics 523
Dr. David Dieterle
Table of Contents
Abstract……………………………………………………………………………………………3
Effects of Corruption on Economic Growth………………………………………………………4
Definition of Corruption..................................................................................................................4
Economic Rent…………………………………………………………………………….4
Bribery…………………………………………………………………………………….5
Trade Restrictions…………………………………………………………………………5
Is Corruption Good or Bad for an Economy………………………………………………………6
Low Levels of Corruption…………………………………………………………………6
Vietnam’s Economic Growth……………………………………………………..7
High Levels of ...view middle of the document...

But it’s not just individuals in public office that are corrupt. Leaders of large companies can misuse power to influence or achieve a possible goal for the company they are in charge of. Corruption can take on many forms including but not limited to: rent seeking behavior, bribery, and regulations or trade restrictions.
Economic Rent
The term rent or rent seeking is not what we pay to the landlord of our apartment or house. According to Mauro (1997), rent (which is short for economic rent) is the overage paid to somebody or something that is useful and whose supply is either limited by nature or human cleverness. An example of economic rent is when the U.S. government restricted the import of Japanese automobiles to a limited quantity, thus creating a shortage of foreign automobiles. Not only did U.S. automobile manufactures like General Motors sell more cars, but they also raised their prices knowing that consumers would pay it and in turn enjoyed the economic rent, which is the overage between the domestic cars and the cheaper but more unavailable Japanese cars (Mauro, 1997). Some rent seeking activities are legal, however, some are not and along with rent seeking behavior we see often see bribery.
Bribery
Every day we hear about an executive or a business that has attempted or has succeeded in bribing a government official to restrict competition so that their firm or their industry can realize a rent. In fact, it’s not even unheard of to think that a person of authority will maneuver themselves into a place where they can accept a bribe (Mauro, 1997). Bribery is the most direct link to corruption that an individual will see (Hardoon and Finn, 2013). Bribes can influence individuals in offices or officials with authority to make decisions that will impact the goal set by the briber. Sadly yes, some officials will take the bribes. And this is where we can normally link the government with corruption.
Some officials, who have intentionally maneuvered themselves into a place of authority, will actually hurt others in some way or another if they don’t get a bribe. We often see this in weakened government institutions. For example, in Morocco, there was a national program in place to help provide slum dwellers with more acceptable living situations. If the dwellers could not pay any money to the public officials that were responsible in making sure the dwellers found better living conditions, those slum dwellers were left on the street after their slum was destroyed (Hardoon and Finn, 2013).
Trade Restrictions
Trade restrictions are a great example of when the government gets involved with rent seeking behavior. If protecting a home industry is important to the government administration, that government administration will place a trade restriction on the quantity of goods imported, as we saw in the example of the U.S. government restricting the quantity of Japanese automobiles in the 1980s. Domestic businesses or industries will...

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