Connections and Privileged Access: Essays on The Political Economy of Corruption
Acts of corruption at all levels have serious negative consequences for governments' finances and citizens' standards of living. Yet, corruption is largely sustained by norms and behavior (e.g., favoring one's family, reciprocity) that would be considered pro-social, were it not for the fact that they involve the misuse of public funds and the abuse of public office. In this dissertation I explore two themes that underpin this contradiction. First, citizen-bureaucrat relations, and how individuals, in their roles as ordinary citizens or managers of firms, use connections to elected officials and bureaucrats to obtain privileged access to public services or public procurement contracts. Second, the link between bureaucratic capacity and corruption. Chapter 2 proposes a novel explanation for citizen engagement in collusive forms of petty corruption. It is rooted in the social context in which citizen-bureaucrat interactions take place. I argue that social proximity and network centrality provide the two key enforcement mechanisms that sustain favor exchanges among socially connected individuals. Bribery, as a collusive arrangement between a citizen and a public official, relies on the same enforcement mechanisms. Using an original dataset from a household survey conducted in Guatemala, the analysis shows that social proximity and centrality allow citizens to obtain privileges through implicit favor exchanges and illicit payments. These effects go beyond simply increasing the frequency of contact with public officials and are not driven by better access to information about the bribery market. Chapter 3 examines how exposure to, or engagement in different forms of petty corruption transforms into overall assessments of state capacity. In it, I argue that two components of corrupt transactions, namely whether a payment is required and whether an illegal advantage is granted, affect citizen’s perceptions of state capacity in different ways. The act of paying a street-level bureaucrat informs a citizen of the state’s inability to prevent its workers from engaging in corruption. In contrast, the experience of obtaining illicit advantages informs a citizen of the state’s ability to provide expedited service delivery. To test the implications of this argument I rely, once again, on survey data from Guatemala, and find that exposure to extortion by street-level bureaucrats has a negative effect on individuals’ perceptions of the government’s capacity to provide services. Furthermore, obtaining illicit advantages through favor exchanges positively impacts perceptions of state capacity, but engaging in bribery has no effect on such perceptions since the effect of making a payment offsets that of receiving an advantage. Finally, Chapter 4 explores the dynamics of political favoritism in public procurement. In this chapter, I draw a sharp distinction between the extent to which a bureaucracy is politically controlled and its technical capacity. I argue that in politically controlled bureaucracies, stronger technical capacity facilitates corruption. In such contexts, more capable bureaucrats utilize their skills to shield favored firms from competition using complex strategies that minimize the risk of detection. I test the argument on a novel dataset of 54,623 municipal contracts in Guatemala and 21,631 firm-politician ties. In line with the argument, I find that more capable bureaucracies increase the likelihood of well-connected firms winning contracts through less competitive processes, even after controlling for a firm’s experience, size and previous business with the municipality. Furthermore, my analysis suggest that high-skilled bureaucrats rely on tender manipulation to favor connected firms.
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