The Quality of Bureaucracy and Capital Account Policies

The extent of bureaucracy varies extensively across countries, but the quality of bureaucracy within a country changes more slowly than economic policies. The authors propose that the quality of bureaucracy may be an important structural determinan...

Full description

Bibliographic Details
Main Authors:	Bai, Chong-En, Wei, Shang-Jin
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2014
Subjects:	ASSETS BUREAUCRACY BUREAUCRAT BUREAUCRATIC CORRUPTION BUREAUCRATIC QUALITY BUSINESS LICENSES CAPITAL FLIGHT CENTRAL BANK CENTRAL BANKS CITIZENS CIVIL LIBERTIES COMPETITIVENESS CONSENSUS CORRUPT COUNTRIES CORRUPT OFFICIALS CORRUPTION COST OF CAPITAL DEBT DEGREE OF CORRUPTION DEMOCRACY ECONOMIC DEVELOPMENT ECONOMIC EFFICIENCY ECONOMIC RESEARCH ECONOMISTS EMBEZZLEMENT EMPIRICAL ANALYSIS EMPIRICAL EVIDENCE EQUILIBRIUM EXCHANGE RATES EXECUTION EXPECTED UTILITY EXPENDITURE EXPORTS FEDERAL RESERVE BANK OF NEW YORK FIGHTING CORRUPTION FINANCIAL CRISIS FISCAL FISCAL RESOURCES FISCAL REVENUES FOREIGN ASSETS FOREIGN EXCHANGE GCR GDP GOVERNMENT CONSUMPTION GOVERNMENT OFFICIALS GOVERNMENT RESOURCES GOVERNMENTAL ORGANIZATION INCOME INCOME EFFECT INFLATION INFLATION RATE INTEREST RATE INTERNATIONAL DEVELOPMENT JUDICIARY LEGAL SYSTEM LEVELS OF GOVERNMENT MACROECONOMIC POLICIES MARGINAL COST MEASUREMENT ERROR MEASUREMENT ERRORS OPTIMIZATION POLITICAL POWER POLITICAL RIGHTS POLITICAL RISK PRIVATE CONSUMPTION PUBLIC FINANCE PUBLIC GOOD PUBLIC GOODS PUBLIC GOVERNANCE PUBLIC INSTITUTION PUBLIC INSTITUTIONS PUBLIC POLICY REVERSE CAUSALITY RISK AVERSION SAVINGS SOCIAL WELFARE STATISTICAL ANALYSIS SUBSTITUTION EFFECT TAX COLLECTION TAX EVASION TAX RATE TAX REVENUE TAX REVENUES TAXATION TRANSPARENCY UTILITY FUNCTION WEALTH
Online Access:	http://documents.worldbank.org/curated/en/2001/03/1089467/quality-bureaucracy-capital-account-policies http://hdl.handle.net/10986/19695

id	okr-10986-19695
recordtype	oai_dc
spelling	okr-10986-196952021-04-23T14:03:44Z The Quality of Bureaucracy and Capital Account Policies Bai, Chong-En Wei, Shang-Jin ASSETS BUREAUCRACY BUREAUCRAT BUREAUCRATIC CORRUPTION BUREAUCRATIC QUALITY BUSINESS LICENSES CAPITAL FLIGHT CENTRAL BANK CENTRAL BANKS CITIZENS CIVIL LIBERTIES COMPETITIVENESS CONSENSUS CORRUPT COUNTRIES CORRUPT OFFICIALS CORRUPTION COST OF CAPITAL DEBT DEGREE OF CORRUPTION DEMOCRACY ECONOMIC DEVELOPMENT ECONOMIC EFFICIENCY ECONOMIC RESEARCH ECONOMISTS EMBEZZLEMENT EMPIRICAL ANALYSIS EMPIRICAL EVIDENCE EQUILIBRIUM EXCHANGE RATES EXECUTION EXPECTED UTILITY EXPENDITURE EXPORTS FEDERAL RESERVE BANK OF NEW YORK FIGHTING CORRUPTION FINANCIAL CRISIS FISCAL FISCAL RESOURCES FISCAL REVENUES FOREIGN ASSETS FOREIGN EXCHANGE GCR GDP GOVERNMENT CONSUMPTION GOVERNMENT OFFICIALS GOVERNMENT RESOURCES GOVERNMENTAL ORGANIZATION INCOME INCOME EFFECT INFLATION INFLATION RATE INTEREST RATE INTERNATIONAL DEVELOPMENT JUDICIARY LEGAL SYSTEM LEVELS OF GOVERNMENT MACROECONOMIC POLICIES MARGINAL COST MEASUREMENT ERROR MEASUREMENT ERRORS OPTIMIZATION POLITICAL POWER POLITICAL RIGHTS POLITICAL RISK PRIVATE CONSUMPTION PUBLIC FINANCE PUBLIC GOOD PUBLIC GOODS PUBLIC GOVERNANCE PUBLIC INSTITUTION PUBLIC INSTITUTIONS PUBLIC POLICY REVERSE CAUSALITY RISK AVERSION SAVINGS SOCIAL WELFARE STATISTICAL ANALYSIS SUBSTITUTION EFFECT TAX COLLECTION TAX EVASION TAX RATE TAX REVENUE TAX REVENUES TAXATION TRANSPARENCY UTILITY FUNCTION WEALTH The extent of bureaucracy varies extensively across countries, but the quality of bureaucracy within a country changes more slowly than economic policies. The authors propose that the quality of bureaucracy may be an important structural determinant of open economy macroeconomic policies - especially the imposition or removal of capital control. In their model, capital controls are an instrument of financial repression. They entail efficiency loss for the economy but also generate implicit revenue for the government. The results show that bureaucratic corruption translates into the government's reduced ability to collect tax revenues. Even if capital controls and financial repression are otherwise inefficient, the government still has to rely on them to raise revenues to provide public goods. Among the countries for which the authors could get relevant data, they find that the more corrupt ones are indeed more likely to impose capital controls, a pattern consistent with the model's prediction. To deal with possible reverse causality, they use the extent of corruption in a country's judicial system, and the degree of democracy, as the instrumental variables for bureaucratic corruption. The instrumental variable regressions show the same result: more corrupt countries are associated with more severe capital controls. The results suggest that as countries develop and improve their public institutions, reducing bureaucratic corruption over time, they will choose to gradually liberalize their capital accounts. Removing capital controls prematurely when forced by outside institutions to do so could reduce rather than improve their economic efficiency. 2014-08-26T18:35:32Z 2014-08-26T18:35:32Z 2001-03 http://documents.worldbank.org/curated/en/2001/03/1089467/quality-bureaucracy-capital-account-policies http://hdl.handle.net/10986/19695 English en_US Policy Research Working Paper;No. 2575 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	ASSETS BUREAUCRACY BUREAUCRAT BUREAUCRATIC CORRUPTION BUREAUCRATIC QUALITY BUSINESS LICENSES CAPITAL FLIGHT CENTRAL BANK CENTRAL BANKS CITIZENS CIVIL LIBERTIES COMPETITIVENESS CONSENSUS CORRUPT COUNTRIES CORRUPT OFFICIALS CORRUPTION COST OF CAPITAL DEBT DEGREE OF CORRUPTION DEMOCRACY ECONOMIC DEVELOPMENT ECONOMIC EFFICIENCY ECONOMIC RESEARCH ECONOMISTS EMBEZZLEMENT EMPIRICAL ANALYSIS EMPIRICAL EVIDENCE EQUILIBRIUM EXCHANGE RATES EXECUTION EXPECTED UTILITY EXPENDITURE EXPORTS FEDERAL RESERVE BANK OF NEW YORK FIGHTING CORRUPTION FINANCIAL CRISIS FISCAL FISCAL RESOURCES FISCAL REVENUES FOREIGN ASSETS FOREIGN EXCHANGE GCR GDP GOVERNMENT CONSUMPTION GOVERNMENT OFFICIALS GOVERNMENT RESOURCES GOVERNMENTAL ORGANIZATION INCOME INCOME EFFECT INFLATION INFLATION RATE INTEREST RATE INTERNATIONAL DEVELOPMENT JUDICIARY LEGAL SYSTEM LEVELS OF GOVERNMENT MACROECONOMIC POLICIES MARGINAL COST MEASUREMENT ERROR MEASUREMENT ERRORS OPTIMIZATION POLITICAL POWER POLITICAL RIGHTS POLITICAL RISK PRIVATE CONSUMPTION PUBLIC FINANCE PUBLIC GOOD PUBLIC GOODS PUBLIC GOVERNANCE PUBLIC INSTITUTION PUBLIC INSTITUTIONS PUBLIC POLICY REVERSE CAUSALITY RISK AVERSION SAVINGS SOCIAL WELFARE STATISTICAL ANALYSIS SUBSTITUTION EFFECT TAX COLLECTION TAX EVASION TAX RATE TAX REVENUE TAX REVENUES TAXATION TRANSPARENCY UTILITY FUNCTION WEALTH
spellingShingle	ASSETS BUREAUCRACY BUREAUCRAT BUREAUCRATIC CORRUPTION BUREAUCRATIC QUALITY BUSINESS LICENSES CAPITAL FLIGHT CENTRAL BANK CENTRAL BANKS CITIZENS CIVIL LIBERTIES COMPETITIVENESS CONSENSUS CORRUPT COUNTRIES CORRUPT OFFICIALS CORRUPTION COST OF CAPITAL DEBT DEGREE OF CORRUPTION DEMOCRACY ECONOMIC DEVELOPMENT ECONOMIC EFFICIENCY ECONOMIC RESEARCH ECONOMISTS EMBEZZLEMENT EMPIRICAL ANALYSIS EMPIRICAL EVIDENCE EQUILIBRIUM EXCHANGE RATES EXECUTION EXPECTED UTILITY EXPENDITURE EXPORTS FEDERAL RESERVE BANK OF NEW YORK FIGHTING CORRUPTION FINANCIAL CRISIS FISCAL FISCAL RESOURCES FISCAL REVENUES FOREIGN ASSETS FOREIGN EXCHANGE GCR GDP GOVERNMENT CONSUMPTION GOVERNMENT OFFICIALS GOVERNMENT RESOURCES GOVERNMENTAL ORGANIZATION INCOME INCOME EFFECT INFLATION INFLATION RATE INTEREST RATE INTERNATIONAL DEVELOPMENT JUDICIARY LEGAL SYSTEM LEVELS OF GOVERNMENT MACROECONOMIC POLICIES MARGINAL COST MEASUREMENT ERROR MEASUREMENT ERRORS OPTIMIZATION POLITICAL POWER POLITICAL RIGHTS POLITICAL RISK PRIVATE CONSUMPTION PUBLIC FINANCE PUBLIC GOOD PUBLIC GOODS PUBLIC GOVERNANCE PUBLIC INSTITUTION PUBLIC INSTITUTIONS PUBLIC POLICY REVERSE CAUSALITY RISK AVERSION SAVINGS SOCIAL WELFARE STATISTICAL ANALYSIS SUBSTITUTION EFFECT TAX COLLECTION TAX EVASION TAX RATE TAX REVENUE TAX REVENUES TAXATION TRANSPARENCY UTILITY FUNCTION WEALTH Bai, Chong-En Wei, Shang-Jin The Quality of Bureaucracy and Capital Account Policies
relation	Policy Research Working Paper;No. 2575
description	The extent of bureaucracy varies extensively across countries, but the quality of bureaucracy within a country changes more slowly than economic policies. The authors propose that the quality of bureaucracy may be an important structural determinant of open economy macroeconomic policies - especially the imposition or removal of capital control. In their model, capital controls are an instrument of financial repression. They entail efficiency loss for the economy but also generate implicit revenue for the government. The results show that bureaucratic corruption translates into the government's reduced ability to collect tax revenues. Even if capital controls and financial repression are otherwise inefficient, the government still has to rely on them to raise revenues to provide public goods. Among the countries for which the authors could get relevant data, they find that the more corrupt ones are indeed more likely to impose capital controls, a pattern consistent with the model's prediction. To deal with possible reverse causality, they use the extent of corruption in a country's judicial system, and the degree of democracy, as the instrumental variables for bureaucratic corruption. The instrumental variable regressions show the same result: more corrupt countries are associated with more severe capital controls. The results suggest that as countries develop and improve their public institutions, reducing bureaucratic corruption over time, they will choose to gradually liberalize their capital accounts. Removing capital controls prematurely when forced by outside institutions to do so could reduce rather than improve their economic efficiency.
format	Publications & Research :: Policy Research Working Paper
author	Bai, Chong-En Wei, Shang-Jin
author_facet	Bai, Chong-En Wei, Shang-Jin
author_sort	Bai, Chong-En
title	The Quality of Bureaucracy and Capital Account Policies
title_short	The Quality of Bureaucracy and Capital Account Policies
title_full	The Quality of Bureaucracy and Capital Account Policies
title_fullStr	The Quality of Bureaucracy and Capital Account Policies
title_full_unstemmed	The Quality of Bureaucracy and Capital Account Policies
title_sort	quality of bureaucracy and capital account policies
publisher	World Bank, Washington, DC
publishDate	2014
url	http://documents.worldbank.org/curated/en/2001/03/1089467/quality-bureaucracy-capital-account-policies http://hdl.handle.net/10986/19695
_version_	1764440341325283328

The Quality of Bureaucracy and Capital Account Policies

Similar Items