The Political Economy of Corruption and the Role of Financial Institutions
b'In transition and developing countries, we observe rather high levels of\\ncorruption even if they have democratic political systems. This is\\nsurprising from a political economy perspective, as the majority of people\\ngenerally suffers from high corruption levels. Our model is based on the\\nfact that corrupt officials have to pay an entry fee to get lucrative\\npositions. In a probabilistic voting model, we show that a lack of financial\\ninstitutions can lead to more corruption as more voters become part of the\\ncorrupt system. Well-functioning financial institutions, in turn, can\\nincrease the political support for anti-corruption measures.'