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State Capture in Transition Summary
FindingsJoel Hellman and Daniel KaufmannThe
World Bankhttp//www.worldbank.org/wbi/governan
ce
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New Research Program Findings on State Capture
and Grand Corruption

• New work unbundles and measures corruption,
  state capture and governance evidence from 3600
  firms in 22 transition economies. Key input to
  new Anticorruption in Transition report.
• Questions about investment climate, enterprise
  performance and behaviour interactions between
  the state and firm
• Implemented jointly by World Bank and EBRD in
  collaboration with ECA region (Wbank), in context
  of Anticorruption Report.
• Corruption is dissected administrative
  corruption, State Capture and procurement
  kickbacks -- with major implications
• Seize the State, Seize the Day paper, Sept.
  2000
• Details and data available at http//www.worldbank
  .org/wbi/governance

Data subject to margins of error and need to be
interpreted with caution. Data and views are not
necessarily official-institutional.
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Small firms and New Entrants face more
administrative (petty) corruption in transition
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...Yet the focus ought to shift to Grand
Corruption firms shaping the legal, policy and
regulatory environment by illegally purchasing
the laws, policies and regulations of the state
(State Capture by corporates) State Capture
Index and its Components ( of firms affected by
corporate purchase of...)
Source Hellman, Jones and Kaufmann Seize the
State, Seize the Day, http//www.worldbank.org/
wbi/governance/
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Extent of the Capture Economy in Transition
(based on overall State Capture Index -- see
previous slide)
45
40
35
30
25
State Capture Index
( of firms affected by state capture)
20
15
10
5
0
Latvia
Russia
Poland
Albania
Croatia
Estonia
Overall
Belarus
Georgia
Romania
Slovakia
Ukraine
Armenia
Bulgaria
Hungary
Moldova
Slovenia
Lithuania
Azerbaijan
Czech Rep
Kazakhstan
Uzbekistan
Kyrgyzstan
For details, including margins of error and data
sources, visit www.worldbank.org/wbi/governance/
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For Firms, Capture is strategy that started with
insecure property rights they faced
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Country-wide State capture is associated with
incomplete civil liberties ( slow economic
reforms)
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Capture brings substantial gains to the captor
firms -- within the Capture Economy (in high
capture countries)
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Further Social costs of state capture Much
lower growth in sales and investment in economy
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Some Policy Implications

• Anti-corruption efforts should focused more on
  state capture as the root of governance problems
• Need to factor in that the roots of state capture
  result from partial civil liberties, lack of
  transparency and insecurity of property rights
• Need to address link between corporate (including
  FDI) and national-level governance
• Political and Economic competition limit state
  capture
• deconcentration of economic activity
• civil society, collective action and political
  accountability
• For details and data http//www.worldbank.org/wb
  i/governance/