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Measuring governance and state capture: the role of bureaucrats and firms in shaping the business environment
Recent studies have focused on the characteristics and policies of the state
to explain the extent and causes of corruption, with little attention paid to
the role played by firms. Consequently, the links between corporate governance
and national governance have been unexplored. This paper summarises the
results of the Business Environment and Enterprise Performance Survey BEEPS)
across 20 transition economies, providing an assessment of governance and
corruption from the perspective of firms. The BEEPS is part of the global
World Business Environment Survey being carried out by the World Bank. The
survey design permits an in-depth empirical analysis of governance and
corruption, unbundling governance into its component dimensions. This allows a
more detailed quantitative assessment of corruption, a more nuanced
understanding of the causes of the problem and as a result a stronger
foundation for policy advice. Particular attention is paid to "state capture"
by parts of the corporate sector (i.e. the propensity of firms to shape the
underlying "rules of the game" including "purchase" of legislation and court
decisions). The survey also provides measures of other dimensions of "grand
corruption" such as that related to public procurement. Typically,
crosscountry surveys suffer from a potential bias if firms have a tendency to
systematically over- or underestimate the extent of problems in their own
country. We implement a simple method for evaluating the extent of this
"country perception bias" and find little evidence pointing to such bias in
the BEEPS.
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