1. CORRUPTION Transition Economies Presented By AJ Cericola

2. Definition of Corruption Misuse of Power for private gain  Bribery  Extortion  Manipulation of Laws It’s all about growth…

3. Corruption Type 1: State Capture Corruption  Influencing Laws, Regulations, Policies for own advantage

4. Corruption Type 2: Administration Corruption  Intentional imposition of distortions in the prescribed implementation of existing laws

5. Corruption Across the Globe

6. Corruption and Growth

7. Corruption and Development

8. Sectors of Corruption: Enterprise Growth SME’s are most important for jobs, innovation, and growth 1. Labor force and new jobs 2. Less capital intensive – more labor 3. Product innovative, not process innovative 4. More financially constrained; represent 94% of business finance 5. Contribute to growth in recession more than larger firms

9. Bribes Paid

10. Sectors of Corruption: Investment Much economic theory assume positive relationship between investment and growth 4 areas Corruption affects investment: 1. Total investments 2. Size and composition of FDI 3. Size of public investment 4. Quality of decisions and projects

11. Sectors of Corruption: Investment Studies show that improvements in the corruption index (i.e. reduction in corruption) can increase investment GDP ratio Comparison:  1% increase in MTR on FDI = reduction of incoming FDI ~ 3.3%  1pt. increase on corruption index = reduction in the flow of FDI ~ 11%

12. Anti-Corruption: What can be done?

13. Case Study: Poland 1956: Khrushchev denounces Stalin Worker’s strike in Poznan starts market socialism and limited civil liberties 1980: emergence of Solidarity 1989: parliamentary political system with proportional representation Strong public administration skills

14. Case Study: Croatia & Slovak Republic Advanced among Central & Eastern European countries Nationalism Concentration of political power 1994: worst year of corruption for Slovak Republic and Croatia

15. Croatia

16. Slovak Republic

17. Case Study: Latvia State Capture is high Economy is highly concentrated: political parties run close with economic interests 1995: adoption of conflict of interest laws 1997: Corruption Prevention Council

18. Latvia

19. Transparency: CPI Index

20. After thoughts… Why does Poland have a decreasing CPI? Do they not have an anti-corruption strategy? Can bad infrastructure cause corruption? Your Questions…