Corruption: Interpretation in light of the New Institutional Economics

Abstract

This paper examines corruption in the light of the new institutional economics. This reading is important with the renewed interest in the quality of institutions in the explanation of economic performance, especially after the decline of microeconomic analyses, notably in the framework of agency theory and rent-seeking theory. The latter have shown their limitations in the study of a phenomenon as complex as corruption.

We first provide an analytical exercise of formal and informal institutions and their modes of interaction. In a second step, we will proceed to a reading of corruption from its relationship with institutions and then as a component of governance. In view of the results obtained, it seems that corruption is itself considered to be an informal institution. It interacts with formal and informal institutions in different contexts, and it is the type of interaction that determines the levels of corruption in different countries.

Our reading suggests that policymakers need to take informal institutions into consideration when designing anti-corruption and integrity promotion strategies. This type of institution has a significant impact on the behavior of individuals and firms with respect to corrupt practices. Taking ownership of one's own anti-corruption measures based on contextual and institutional specificities is the best way to control corruption.

JEL Classification: B52

Paper type: Theoretical Research