Many economists assume that governmental corruption

Question

Many economists assume that governmental corruption hinders economic development, because businesses must spend much of their income on expensive bribes. But an international survey found that in the past decade, economic growth in percentage terms has been just as rapid in nations with more corrupt governments as in other nations.

Which of the following, if true, most helps resolve the apparent discrepancy described above?

(A) In most nations, businesses spend much of their income on taxes and compliance with regulations, regardless of the level of governmental corruption.
(B) In the past decade, the proportion of business income spent on taxes has, on average, declined faster in nations with more corrupt governments than in other nations.
(C) In general, an increase in the amount of income that businesses must spend on bribes substantially reduces the after-tax income of those businesses.
(D) The strengthening of laws against corrupt practices can make a country’s economy more attractive to investors.
(E) In the past decade, the proportion of business income spent on bribes has, on average, been highest in the nations with the most corrupt governments.

WINIFREDWU1103 · Answer

I thought Taxes are important to economic growth? Could someone explain answer B? Thanks

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gmtaker · Answer

The argument says that governmental corruption hinders economic development, because businesses must spend much of their income on expensive bribes. It laters says that it didn't hinder it at all.

What other factors could correlate with bribes and increase the income of the business even though a certain amount was spent on bribes?
Choice B. is the most apt answer as it suggests that bribing helped the business not pay taxes and keep that income instead. 
"the proportion of business income spent on taxes has, on average, declined faster in nations with more corrupt governments than in other nations."

Harish_IITB · Answer

The question says that as per economists, bribes given by business hinders economic growth. However, the economic growth for corrupt and other (maybe less corrupt) nations is the same. Here, the author's logic is that because businesses lose money, it will negatively affect the business and, ultimately, the economy.

Any new information that will help us resolve the paradox.

Pre-thinking: Maybe there is something else benefit that the business gets because of the bribe, which helps them save money almost equal to what they lose on a bribe. Which essentially offset the negative of Bribe.

*(B) In the past decade, the proportion of business income spent on taxes has, on average, declined faster in nations with more corrupt governments than in other nations.*

Now if we see option B, We can see that paying less tax may be offsetting the negative of bribes, helping the economy grow at the same rate.

lehung97 · Answer

B:

While taxes may be reduced, the absolute amount of tax typically remains substantial. As a result, paying bribes can still make economic sense for businesses. This explains why economic growth may still occur in regions with high corruption levels—because the cost-benefit logic remains favorable for firms.

Many economists assume that governmental corruption

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Many economists assume that governmental corruption

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