Measuring Governance, Corruption, and State Capture : How Firms and Bureaucrats Shape the Business Environment in Transit

April 2000 - In a new approach to measuring typically subjective variables, BEEPS - the 1999 Business Environment and Enterprise Performance Survey, the transition economies component of the World Business Environment Survey - quantitatively assesses governance from the perspective of about 3,000 fi...

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Main Author: Hellman, S. Joel
Other Authors: Jones, Geraint, Kaufmann, Daniel
Format: eBook
Language:English
Published: Washington, D.C The World Bank 1999, 1999
Subjects:
Law
Online Access:
Collection: World Bank E-Library Archive - Collection details see MPG.ReNa
Summary:April 2000 - In a new approach to measuring typically subjective variables, BEEPS - the 1999 Business Environment and Enterprise Performance Survey, the transition economies component of the World Business Environment Survey - quantitatively assesses governance from the perspective of about 3,000 firms in 20 countries. Unbundling the measurement of governance and corruption empirically suggests the importance of grand corruption in some countries, manifested in state capture by the corporate sector - through the purchase of decrees and legislation - and by graft in procurement. As a symptom of fundamental institutional weaknesses, corruption needs to be viewed within a broader governance framework. It thrives where the state is unable to reign over its bureaucracy, to protect property and contractual rights, or to provide institutions that support the rule of law.
Furthermore, governance failures at the national level cannot be isolated from the interface between the corporate and state sectors, in particular from the heretofore underemphasized influence that firms may exert on the state. Under certain conditions, corporate strategies may exacerbate misgovernance at the national level. An in-depth empirical assessment of the links between corporate behavior and national governance can thus provide particular insights. The 1999 Business Environment and Enterprise Performance Survey (BEEPS) - the transition economies component of the ongoing World Business Environment Survey - assesses in detail the various dimensions of governance from the perspective of about 3,000 firms in 20 countries. After introducing the survey framework and measurement approach, Hellman, Jones, Kaufmann, and Schankerman present the survey results, focusing on governance, corruption, and state capture.
By unbundling governance into its many dimensions, BEEPS permits an in-depth empirical assessment. The authors pay special attention to certain forms of grand corruption, notably state capture by parts of the corporate sector - that is, the propensity of firms to shape the underlying rules of the game by purchasing decrees, legislation, and influence at the central bank, which is found to be prevalent in a number of transition economies. The survey also measures other dimensions of grand corruption, including those associated with public procurement, and quantifies the more traditional (pettier) forms of corruption. Cross-country surveys may suffer from bias if firms tend to systematically over- or underestimate the extent of problems within their country. The authors provide a new test for this potential bias, finding little evidence of country perception bias in BEEPS.
This paper - a joint product of Governance, Regulation, and Finance, World Bank Institute, and the Chief Economist's Office, European Bank for Reconstruction and Development - is part of a larger program to measure governance and corruption worldwide. A companion working paper that econometrically analyzes the effects of state capture is forthcoming. For further details, visit www.worldbank.org/wbi/governance. The authors may be contacted at dkaufmann@worldbank.org or hellmanj@ebrd.com
Physical Description:Online-Ressource (1 online resource (50 p.))