A Conceptual Formulation of Microeconomic Incentives for Household Level Corruption [An econometric Proposition

Abstract

The devastating consequence of corrupt practices has influenced most researchers devoting more time assessing the extent of the government or the public sector corruption to the neglect of the micro-level causes. Most often the problem of corruption has been limited to the public office holders, neglecting the fundamental aspect of the phenomenon: the corruption among non-public officials; what is being referred to as the ‘household-level corruption’. This study, contrary to the existing literature, attempts to find the linkage between corruption and poverty by carefully formulating an econometric model to explain the incentive for the deficit spending household units to indulge in corrupt practices, even sometimes against their wishes. Hypothesis being postulated here is that an aspect of corruption in the developing economies can be attributed to a missing or malfunctioning credit market which compels the household to engage in corrupt practices as a means to financing their deficits, in much the same way other economic agents (governments and business firms) do finance their budget deficit. Using generalised least square (GLS) method of estimation, the model conceptually hypothesized that an aspect of incentive to indulge in corruption among poverty-stricken households could be eliminated with a well functioning and more accessible credit market.