This paper explores how the relationship between bureaucratic complexity and corruption affects the performance in utilities. We observe considerable variation in the performance of the utilities across countries, even across countries which appear to be relatively similar. Our hypothesis is that corruption plays an important role in explaining this observed difference in performance. In particular, corruption coupled with a complex regulatory structure can have negative effects on performance. The analysis pointsat the importance of considering the institutional framework and institutional quality when introducing new bureaucratic procedures, as the same set of policy advice will work differently in different countries.

We measure bureaucratic complexity by the number of procedures needed for starting a business from the Doing Business Database provided by theWorld Bank.