Research Seminar on Diversity and Development Aleksey Oshchepkov "Market and Network Corruption"

HSE International Center for the Study of Institutions and Development (ICSID) and NES Center for the Study of Diversity and Social Interactions are pleased to announce their next joint Research Seminar on Diversity and Development.The event is held jointly with the seminar “Political Economy”.

Aleksey Oshchepkov, Senior Research Fellow at the Centre for Labour Market Studies, will present his paper "Market and Network Corruption" (co-authored by Maria Kravtsova).

The seminar will take place in the HSE building at 26-4 Shabolovka str., room 4409, at 5.00 p.m. on Tuesday, February 26, 2019.

Working language of the seminar is English.

We would like to ask everyone who requires an HSE pass to send an e-mail to Oksana Antsiferova oantsiferova(at)hse.ru (stating your name, surname, your affiliation and contact e-mail address) until 10 a.m., February 26.

Abstract: Economists tend to reduce all corruption to impersonal market-like transactions, ignoring the role of social ties in shaping corruption. In this paper, we show that this simplification substantially limits the understanding of corruption. We distinguish between market corruption (impersonal bribery), and network (or parochial) corruption which is conditional on the social connections between bureaucrats and private agents. We argue, both theoretically and empirically, that these types of corruption have different qualities. Using data from the Life in Transition Survey (LiTS) which covers all post-socialist countries we show, first, that the correlation between market and network corruption is weak, which implies that ignoring network corruption leads not only to an underestimation of the overall scale of corruption but also biases national corruption rankings. Secondly, in line with theoretical expectations, we find that network corruption is more persistent over time, less related to contemporary national socio-economic and institutional characteristics and has stronger historical roots than market corruption. Yet, network corruption, unlike bribery, is not able to ‘grease the wheels’ and is not associated with political instability. Lastly, we show that the decline in bribery which was observed in almost all post-socialist countries in the period from 2010 to 2016 was accompanied by rising network corruption in many of them, which has important policy implications.