Badly Designed Institutions, Informal Rules and Perverse Incentives: Local Government Corruption in Spain

Abstract

This paper analyses the problem of corruption in the local government in Spain, where despite a complex and sophisticated set of local rules to ensure due process in town planning and urban development, a great number of corruption incidents have come to light. The explanation of this outcome rests in the combined effect of factors such as the bad design of both integrity rules and town planning policies, the relevance of informal institutions such as the patronage networks, and the existence of perverse incentives. The Spanish case highlights the important influence of local informal institutions for the actual working of formal ones.