As a part of the Economic Lecture series conducted by the Institute, a lecture on Economics of Corruption was held at IIM Indore on February 10, 2017 by Professor Vivekananda Mukherjee, Department of Economics, Jadavpur University.
Professor Mukherjee began his talk by explaining the definition of corruption, conducting an interactive session with the participants and the faculty. He elaborated how corruption is an act that violates laws/norms of a society and causes inequity and inefficiency. He also noted that whether an act can be considered an act of corruption depends on the society and that corruption may not be considered bad when existing laws/norms do not ensure equity and efficiency.
Professor Mukherjee then discussed about the three types of incentives to curb corruption – economic, social, and moral. He cautioned on using these carefully as they interact among themselves. He also spoke about how risk averse, risk neutral, and risk loving individuals react to enforcement. Professor Mukherjee mentioned that the marginal cost of corruption is lower in an already corrupt society, and explained that the optimal amount of corruption in a society is not zero because there is a trade-off between the marginal cost of controlling corruption and the marginal benefit to the society.
Professor Mukherjee also listed the economic costs of corruption, including costs of inequity and inefficiency, cost of enforcement, and effort/money expended for securing the benefit of corruption. He mentioned that a transfer of bribe is not a cost to society in terms of efficiency. Speaking about the inverse relationship between cost of bribe and frequency of bribes, he spoke of bribe acting as a deterrent of corruption.
The talk concluded with Professor Mukherjee enlightening the participants about the measures of corruption, various subjective and objective indices of corruption across the globe, and characteristics common to the most corrupt countries.