Ferdinand Marcos and Greater Grand Corruption

The Political Economy of Corruption: A Philippine Illustrationa
James Roumasset b Department of Economics, University of Hawai’i at M noa & University of Hawai’i Economic Research Organization

Working Paper No. 08-05 October 27, 2008 Abstract This essay explores the nature, causes, and consequences of corruption as it pertains to entire regimes. Grand corruption is modeled as a type of unproductive rent-seeking at the highest levels of government. The economic costs of corruption are assumed to increase in the decentralization (and relaxation) of its governance, increase convexly in the percentage extracted, and decreasing in the opportunities for productive rent-seeking. Combining these assumptions with the benefits of corruption yields the results that optimal corruption revenues are increasing in greed of the regime and in economic opportunities but that the economic costs of corruption may be highest in the least avaricious regime. The theory is illustrated with a stylized account of corruption in three Philippine administrations, from 1973-1998. Policy implications are discussed, including the role of the economist in making corruption less attractive.

Keywords: Corruption, Philippines, kleptocracy JEL codes: H11, K42, O5

This paper was originally drafted for the Western Economics Association International meetings in Seattle, July 1997, and was issued as University of Hawaii at Manoa Working Paper 97-10 under the title, The Political Economy of Corruption.” Thanks to Lee Endress and Roger Blair for helpful discussions, Majah-Leah Ravago for research and editorial assistance, and to an anonymous referee for constructive comments. All remaining errors are my responsibility. b Professor at the Department of Economics, University of Hawai’i, M noa, and Environmental Director for University of Hawai’i Economic Research Organization. Saunders 542, 2424 Maile Way, Honolulu, HI 96822 USA. E-mail: [e-mail]

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THE POLITICAL ECONOMY OF CORRUPTION:

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