FOR IMMEDIATE RELEASE: January 28, 2005
Contact: Cara Santos Pianesi, 202/939-2211, csantos@CarnegieEndowment.org

The most direct way to break the grip of inefficient, self-serving interests on state power is through the election of new political players not beholden to the same interest groups that supported their predecessors. This is true regardless of political bent and is demonstrated by recent history in postcommunist Eastern Europe. A new policy outlook by Karla Hoff, Shale Horowitz, and Carnegie senior associate Branko Milanovic demonstrates this theory empirically and is available exclusively on the web. Access Political Alternation, Regardless of Ideology, Diminishes Influence Buying at www.CarnegieEndowment.org/democracy.

In many countries, it is more lucrative to pay off politicians or bribe judges to obtain profitable deals and favorable rulings than to seek profits through economic investments. This is particularly true for countries in the early stages of democratic transition. There, rich special interests have few constraints on their ability to buy politicians and invest significant resources because the returns will be high, as fledgling institutions and legal systems are too weak to check executive power. Yet corruption takes time—requiring maintenance of the same, “friendly” conditions over many years. Alternations in power send a powerful signal that government officials may not always be able to deliver on their promises to special interests. As a result, returns on investing in influence decline, fewer people take up this activity, and governance improves.

Using data from postcommunist Eastern European countries, the authors conclude through empirical analysis that, while the effect of alternation is consistently positive on governance, the type of political regime in power has little effect. This conclusion diverges with current scholarship that seeks to explain corruption in transitional countries through other factors such as culture or the duration of communism.

Karla Hoff is a senior research economist at the World Bank.  Shale Horowitz is associate professor in political science at the University of Wisconsin al Milwaukee. Branko Milanovic is a senior associate at the Carnegie Endowment for International Peace.

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