Corruption and the size of government: causality tests for OECD and Latin American countries

The purpose of this article is to examine the causality between government size and corruption, and to verify if there is a different pattern of causality between developed Organization for Economic Co-operation and Development (OECD) countries (excluding Mexico) and developing countries (Latin American countries) during the period 1996 to 2003. Applying Granger and Huang`s (1997) methodology we find evidence that size of government Granger causes corruption in both samples. Since a larger government involvement in private markets today will be followed in future by a higher level of corruption a policy advice would be to enhance governance. The promotion of good governance helps to combat corruption given that it complements efforts to reduce corruption more directly, and it is strongly recommended by the International Monetary Fund, other multilateral institutions, and all worried with the negative impacts of corruption on economic activity.

Loss of Ergodicity in the Transition from Annealed to Quenched Disorder in a Finite Kinetic Ising Model

We consider a kinetic Ising model which represents a generic agent-based model for various types of socio-economic systems. We study the case of a finite (and not necessarily large) number of agents N as well as the asymptotic case when the number of agents tends to infinity. The main ingredient are individual decision thresholds which are either fixed over time (corresponding to quenched disorder in the Ising model, leading to nonlinear deterministic dynamics which are generically non-ergodic) or which may change randomly over time (corresponding to annealed disorder, leading to ergodic dynamics). We address the question how increasing the strength of annealed disorder relative to quenched disorder drives the system from non-ergodic behavior to ergodicity. Mathematically rigorous analysis provides an explicit and detailed picture for arbitrary realizations of the quenched initial thresholds, revealing an intriguing ""jumpy"" transition from non-ergodicity with many absorbing sets to ergodicity. For large N we find a critical strength of annealed randomness, above which the system becomes asymptotically ergodic. Our theoretical results suggests how to drive a system from an undesired socio-economic equilibrium (e. g. high level of corruption) to a desirable one (low level of corruption).