Hundred rubles or hundred friends? (The causes of network and market corruption)

The author distinguishes two forms of corruption - market corruption and network corruption. The market corruption is the use of public office for personal gain, when every firm or individual who pays a bribe receives public services. The network corruption is the use of public office for personal gain, when only those firms or individuals who are in kinship, friendship or business relationships with public officials receive public services. The author believes that network and market corruption may have different causes and consequences, that is why they should be treated separately. Using Life in Transition Survey II from EBRD (2010) the aggregated level of the market corruption, network corruption and the mixed form of corruption was measured. The results showed that the market corruption and the mixed form are strongly positively correlated and are very sensitive to worsening of socio-economic conditions. The pure network corruption correlates negatively with two other forms and is more inert and stable. The pure network corruption is not associated with worsening of socio-economic conditions and is rather a reaction to the strict anticorruption measures in the poor institutional environment.

corruption, market corruption, network corruption, ‘blat’