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Economic Analysis and International Law

Marco Arnone and Leonardo S. Borlini

Corruption presents many legal and regulatory challenges, but these challenges cannot be met by the law in isolation. This book presents economic analysis of crime as an essential tool for shaping an effective legal apparatus. The authors contend that in order to assess whether and how to regulate corruption, it is necessary to start with a thorough inquiry into the causes, institutional and social effects, and most of all, actual and potential economic and financial consequences of crimes. This, they argue, should inform and help shape a balanced legal and regulatory approach to corruption.
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Chapter 7: Governance, corruption, and effects on institutions

Marco Arnone and Leonardo S. Borlini


Corruption is capable of endangering political and social stability and security, undermining the values of democracy and the rule of law (ROL), jeopardizing social, economic and political development. The political and social costs it can provoke may differ greatly. However, it is no secret that it can irremediably damage the openness and equity of any human society. The present section aims to illustrate the effects of corruption in terms of the erosion of the ROL and democratic society. It has to be noted at the outset that the social and economic consequences of corruption may significantly overlap. However, we attempt to isolate the institutional and social effects from the economic costs which were assessed in the two previous sections. Corruption has an impact on social organizations within both the public and private sectors. When it affects a public-private sphere, corruption may appear as an obstacle to the implementation of individual choices - hence, of individual freedoms, as we pointed out in Section 1. In this case corruption affects bureaucracy and finds fertile ground in the discretion that public officials may enjoy. Corruption may also appear in the form of State capture or grand corruption and hinder the decision-making process of government and regulatory agencies. Distortions resulting in corrupt political and administrative systems have a strong adverse impact on the effectiveness of government policies and are a burden for society as a whole.

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