Supply and demand factors of corruption

70767491acThe structure of interests that induce corruption transactions is complex. Based on Tanzi’s analysis, drivers of corruption interest divided into supply and demand factors are summarised in the charticle. One descriptive model that enhances the analysis of corruption behaviour is the so-called principal-agent model.It includes several assumptions:

a. Corruption occurs in the interactions (exchanges) between two actors: public organisations and citizens/businesses. At least one on the actors is a collective unit (the public organisation), which consists of at least two individual actors: principal and agent. Every public organisation is created to serve a public function. The embodiment of this function and the associated discretionary power is with the principal. The agent is the public official who is directly responsible for the implementation of the public function. While the principal is “the holder” of public power, the agent is entrusted with this power by the principal.
b. Due behaviour of public officials (the agents) is prescribed by the rules (laws, norms, prescriptions, etc.) and processes governing the work of the public organisation. Corruption in this context is defined as either (a) noncompliance with rules (violation), which is aimed at and/or results in private benefits for the official or (b) misusing the gaps in the existing processes for exercising corruption transaction. As the behaviour of officials is essentially the use of entrusted public power, corruption is the abuse of this power and also the breach of trust in the relation between the principal and the agent in favour of the client.
c. Corruption acts have two main characteristics which make them difficult to observe and categorise: they are hidden and involve mimicry. These complement each other: if/when a corruption act is exposed, officials almost always make an attempt to interpret their noncompliance with rules as a mistake, poor performance, lack of competence, etc., in order to hide that the noncompliance was deliberate for private gain. As mistakes happen in all
contexts, it is often very difficult to distinguish between “normal” noncompliance and deliberate noncompliance.
d. The public sector is comprised of hierarchies of organisations (central government, local government, agencies, departments, etc.) governed by their internal processes. Except for the highest levels of government, public organisations are in turn agents of the highest level – the President, Prime Minister, etc., which appear as “superior principals.”
e. A corruption transaction can be described as an exchange of resources. The resource of the agent is discretionary power and it is exchanged for the resource of the client – the benefit or gain that the agent receives (money, favours gifts, etc.).
f. The main driver of corruption exchanges is interest. For the agent the interest is defined by the possible gain or benefit. For the client, the interest lies in the need to ‘get things done’ and this entails either deliberate noncompliance with rules by the official (when the client wants to bend the rules in his/her favour) or enforcing compliance with the rules when the agent deliberately resorts to procedural tricks for indefinitely postponing the required decision (‘oiling the cogwheels’).

Source: Authors’ elaboration on Tanzi (1998). Monitoring Anti-Corruption in Europe. Bridging Policy Evaluation and Corruption Measurement, Center for the Study of Democracy, 2015.

For more information see:
Mapping Anticorruption Enforcement Instruments, Center for the Study of Democracy, 2015.
Gambetta, D. (2002). Corruption: An Analytical Map. In S. Kotkin & A. Sajo (Eds.), Political Corruption in Transition: A Skeptic’s Handbook (pp. 33–56). Budapest: CEU Press.
Rothstein, B. (Ed.). (2014).
State-of-the-Art Report on Theories and Harmonised Concepts of Corruption. Quality of Government Institute and Rothstein, B. (2014). “What is the Opposite of Corruption?” Third World Quarterly, 35(5), 737-752. doi:10.1080/01436597.2014.921424

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