Business Integrity, Public Sector Integrity, Income, and National Competitiveness: A Cross-Country Level Analysis

Jae-Hyung Lee

Research Fellow, Seoul Institute for Transparency, University of Seoul, 90 Cheonnong-dong, Dongdaemun-gu, Seoul 130-743, Korea, Fax: +82-2-2210-2858 jhlee2000-1@sit.re.kr

JEL Classification: C31, K20, Z19

Abstract

This paper's main objective is to investigate the new paradigm on combating corruption in both business and public sectors as proposed by Kang and Lee(2003). Utilising a cross-sectional data of 32 countries from the 2002 GCR, combined with the 2002 opacity index and the 2003 CPI, the empirical results are consistent with the proposition that business integrity and public sector integrity lead to economic efficiency, which in turn enhances national competitiveness. We also suggest that per capita real income, business integrity, and public sector integrity are positively inter-related. On the basis of this study, policy makers should choose an objective by comprehensive approach and develop a checks and balances system in both sectors. More specifically, business integrity has a greater effect on both per capita real income and national competitiveness than public sector integrity. It is also evident in cross-country comparisons that national competitiveness has a higher elasticity with respect to both business integrity and public sector integrity in Korea than in the other countries.

Keywords:

Business integrity, Public sector integrity, The checks and balances system

Acknowledgments

This work was supported by the Korea Research Foundation Grant (KRF-2003-005-C00025). The first draft of this paper has been presented at the 3rd Seminar on Anti-corruption, Seoul Institute for Transparency, University of Seoul, Korea, 29 January 2004. I would like to thank discussants who suggested some corrections. Addressing the points raised by paper examiners improved the paper.

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