Showing papers by "World Bank Institute published in 2000"

Seeds of Corruption: Do Market Institutions Matter?

Abstract: Economists in the field of industrial organization, antitrust, and regulation have long recognized certain factors as potent determinants of opportunistic behavior, corruption, and "capture" of government officials. Only now are these relationships becoming conventional wisdom among specialists in economies in transition. Ten years into the transition, corruption is so pervasive that it could jeopardize the best-intentioned reform efforts. Broadman and Recanatini present an analytical framework for examining the role market institutions play in rent-seeking and illicit behavior. Using recently available data on the incidence of corruption and on institutional development, they provide preliminary evidence on the link between the development of market institutions and incentives for corruption. Virtually all of the indicators they examine appear to be important, but three are statistically significant: · The intensity of barriers to the entry of new business. · The effectiveness of the legal system. · The efficacy and competitiveness of services provided by infrastructure monopolies. The main lesson emerging from their analysis: a well established system of market institutions - clear and transparent rules, fully functioning checks and balances (including strong enforcement mechanisms), and a robust competitive environment - reduces opportunities for rent-seeking and hence incentives for corruption. Both the design and effective implementation of such measures are important if a market system is to be effective. It is not enough, for example, to enact first-rate laws if they are not enforced. The local political economy greatly affects whether a given policy reform will curtail corruption. Especially important are the following factors in the political economy: · The credibility of the government's commitment to carrying out announced reforms. · The degree to which government officials are captured by the entities they regulate or oversee. · The stability of the government itself. · The political power of entrenched vested interests. Economists in the field of industrial organization, antitrust, and regulation have long recognized these factors as potent determinants of opportunistic behavior, corruption, and "capture" of government officials. Only now are they becoming conventional wisdom among specialists in economies in transition. This paper - a product of the Poverty Reduction and Economic Management Sector Unit, Europe and Central Asia Region - is part of a larger effort in the region to analyze the determinants of corruption and develop remedies. The authors may be contacted at hbroadman@worldbank.org or frecanatini@worldbank.org.

Disorganization or self- organization?1

Abstract: The transiton from plan to market provides a rare opportnity for insight into the endogenous development of economic institutions. Economic actvities during the Soviet regime were coordinated by a central authority. These coordintg mechanisrs were disrupted duing the transition period, leading to an increase in the transaction costs for firms. Blanchatc and Krerner (1997), among others, emphasize the negative impact of this "disorganion on output behavior at the beginning of transition. Though this argument is correct, we believe that this and simlar works stop short of a fuler characterization of transition by concentrating only on the disruptive dfects of the reforn process. This paper begins where the former works end by exanmining one of the key institutons that have energed spontaneously in response to the challenges of transition: business associations. Its main contribution is to provide enpirical evidence that institutions that help coordinate production and trade spontaneously emnerge in an enviromment characterized bywidespread 'disorganization". Using a lagely unexplored, firm-level data set, ve document the emergence of business associations at the beginning of transition and provide evidence that these new coordinating institutions mitigated the intial output decline. Building on the growing literature on transaction costs and comnplexity, we interpret the emergence of these infornal institutions as the firns' rational response to coordinate activites in a decentralized economy.

Situational Enhancement of Design Validity: The Case of Training Evaluation at the World Bank Institute:

Abstract: The critical role played by research design has been widely discussed among evaluators. Generally there is a consensus that experimental and certain quasi-experimental designs are preferable for their ability to eliminate or minimize threats to internal validity. Least preferred are the class of nonexperimental designs, particularly the one-group, pretest-posttest design. This design, while convenient, is regarded as incapable of controlling for most standard threats to internal validity. In practical applications, however, this design may be stronger than expected. The context, or situation, in which the design is applied may make one or more standard threats to validity implausible. An example from evaluations at the World Bank Institute is provided to demonstrate the effectiveness of this design within a given situation. It is suggested that evaluators carefully review the plausibility of each threat to design validity within the context to which it is applied as a means of adding to their repertoire of existing evaluation tools.

Economic Integration Among Taiwan, Hong Kong and China: A Computable General Equilibrium Analysis

Abstract: This paper investigates the effects of economic integration among Taiwan, Hong Kong and China (CEA). A seven-region, seven-sector computable general equilibrium model for world production and trade is developed for this purpose. The simulation results demonstrate that the three Chinese economies would benefit greatly from further integration by means of liberalizing trade policies. The opportunity cost of isolating the United States from East Asia is high for both the US and the three Chinese economies, suggesting that an economically integrated CEA is in the long-term strategic interest of the United States.

Regionalism versus Multilateralism: The Response of the Third Country

Abstract: The creation or the expansion of a Preferential Trade Arrangement (PTA), in general, hurts the non-member countries because of trade diversion. This could increase the pressure for protection in the non-member countries and, ultimately, worsen the member countries' market access in those outsiders. The insiders have an incentive to pre-empt this reaction by liberalizing their external trade. Regionalism can help multilateralism.