Discussion paper

Institutions and the political economy of corruption in developing countries

1 Apr 2003

This discussion paper tackles the dilemma of Indonesia's rapid economic growth amid a system of corruption and collusion. The author theorises that the political and institutional circumstances of Suharto's Indonesia were such that they gave the leader a powerful incentive to ensure that bribes were not priced excessively and that arbitrary behavior was contained within tolerable limits. This economic incentive structure was dependent upon a political structure and a set of formal and informal institutional mechanisms which reduced agency loss by permitting effective executive oversight and punitive action. The paper then goes on to examine the rather different current political economy of corruption in Indonesia.

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