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  • Author: Johann Graf Lambsdorff. Passau University Discussion Paper 61-10. October 2010

    Abstract: This paper processes responses from households in 66 countries to address differences in the extent to which bribes and gifts are considered acceptable. Levels of acceptance differ substantially from one country to another, but they do not conform to popular expectations: Respondents in rich, western countries do not exhibit lower levels of acceptance. A higher acceptance of bribery can be observed in former colonies and those without a majority religion. Acceptance is higher among those who paid a bribe. Buddhists and less educated judge more situation-specific, accepting more often if they paid bribes themselves. Culture shapes attitudes towards bribery, but the western world fails to exhibit the expected moral rigor.

  • Author: Johann Graf Lambsdorff. Passau University Discussion Paper 60-10. October 2010

    Abstract: This study embeds transaction cost analysis into a Law and Economics model to produce general recommendations on how to deter bribery. Governments may deter bribery either by high penalties and risks of detection, potentially supported by leniency given to those who report their infraction (deterrence regime). Another local optimum is achieved if the government amplifies the risk of opportunism, aggravating the difficulties of enforcing a bribe transaction. This involves a low probability of detection and allowing offenders to keep their ill-gotten gains. If bribes are paid upfront bribe taking will face only mild punishment (constrained enforcement regime).

  • Author: Johann Graf Lambsdorff. Passau University Discussion Paper 57-08. October 2008

    Abstract: Governments and private firms try to contain corruption among their staff mostly in a top-down, rules-based approach. They limit discretion, increase monitoring or impose harsher penalties. Principles-based, bottom-up approaches to anticorruption, instead, emphasize the importance of value systems and employee’s intrinsic motivation. This embraces the invigorating of social control systems, encouraging whistle-blowing, coding of good practice and alerting to red flags. This paper investigates how some top-down measures run counter to bottom-up contributions. Examples range from penalties imposed with zero-tolerance, debarment or the nullity of contracts. While top-down elements are indispensable for containing corruption they must be designed well in order to avoid discouraging the bottom-up endeavors.

    About the Author: Johann Graf Lambsdorff holds a chair position in economic theory at the University of Passau, Germany and is senior advisor to Transparency International. He has published on corruption, institutional economics and monetary economics.

  • Author: Johann Graf Lambsdorff. Case Study of the University of Passau. July 2008

    Abstract: This case study can be used for classroom teaching. It focuses on Tony Blair's decision to stop the British Serious Fraud Office's investigation into the alleged bribery of BAE Systems of Saudi Arabian stakeholders. It allows discussion of the dilemmas faced by policymakers when enforcing (or rejectig to enforce) the 1997 OECD convention that disallows the bribing of foreign officials. The case study confronts participants with legal and political problems, reveals how the media produces lopsided stories that tend to miss where the big money flows and shows how definitions of bribery and administrative independence are key to understand reform.

    About the Author: Johann Graf Lambsdorff holds a chair position in economic theory at the University of Passau, Germany and is senior advisor to Transparency International. He has published on corruption, institutional economics and monetary economics.

  • Author: Mathias Nell. Working Paper. December 2007

    Abstract: This paper argues that contracts induced by means of bribery should be valid. Nullity and voidability decrease the incentive for voluntary disclosure, assist corrupt actors with enforcing their bribe agreements and provide leeway for abuse. Thus, they run counter to effective anti-corruption. It is argued that other instruments are more suitable for preventing corruption.

    About the Author: Mathias Nell is research assistant at the Chair for Economic Theory at the University of Passau. His doctoral thesis deals with corruption, law, and compliance.

  • Author: Mathias Nell. Working Paper. December 2007

    Abstract: Even though high penalties for corruption offences have a deterrent and preventive effect, they also entrap bribe-takers and bribe-givers in their corrupt relationship. Moreover, pending penalties can be misused to make threats against opportunistic behavior and can thus stabilize risky bribe agreements. This paper shows how voluntary disclosure programs can be strategically applied to break the 'pact of silence' and to promote opportunism in a targeted way. Against this background the paper studies the leniency provisions in the penal codes of 56 countries. The analysis reveals deficiencies in the utilization and in the design of voluntary disclosure programs for corruption offences.

    Appendix III: Provisions in Penal Codes (PDF)

    About the Author: Mathias Nell is research assistant at the Chair for Economic Theory at the University of Passau. His doctoral thesis deals with corruption, law, and compliance.

  • Authors: Johann Graf Lambsdorff and Björn Frank. Working Paper. September 2007

    Abstract: We let students play a corruption game, embedded into a variant of the ultimatum game. Those allotted the role of public servants chose between whistleblowing, opportunism and reciprocity by delivery (of a contract) and those acting as businesspeople chose how to frame the game and whether to blow the whistle. While opportunism and abstaining from whistleblowing is the Nash equilibrium, another likely outcome was that businesspeople allocate resources to punishing public servants for non-delivery, exhibiting a preference for negative reciprocity. Anticipating this, public servants might tend to reciprocate or blow the whistle upfront. Female public servants were more inclined to behave opportunistically; female businesspeople were less engaged in negative reciprocity. This corroborates a favorable role of women in anticorruption. Businesspeople who strongly preferred a corrupt framing of the game and obtained a form with corrupt wording were more willing to punish non-delivering public servants. This operates against camouflaging a bribe as a gift, because gifts fail to signal negative reciprocity.

    About the Authors: Johann Graf Lambsdorff holds a chair position in economic theory at the University of Passau, Germany and is senior research consultant for Transparency International. He has published on corruption, institutional economics and monetary economics. Björn Frank holds a chair position in macroeconomics at the TU Clausthal.

  • Author: Frédéric Boehm. Working Paper. September 2007

    Abstract: One of the main objectives of reforms in public service sectors, comprising deregulation, restructuring and private-sector participations, is the introduction of competitive pressures. In turn, effective regulation is one of the key elements for reform’s success. However, regulation is prone to capture by narrow interests. This paper provides an overview of possible anti-corruption strategies which, in the end, have the objective to safeguard the objective of reforms. The paper starts discussing organizational aspects: decentralization, horizontal organization, and the issue of regulatory autonomy. Then three key factors are presented: incentives, institutions and information. Traditional incentive theory within a principal-agent model leads to contemplating control, rewards and sanctions. A new institutional approach taking into account the characteristics of corrupt deals leads to policies aiming at augmenting the transaction costs of corruption and fostering the opportunism between corrupt partners. Finally, measures are discussed seeking to tackle the problem of information asymmetries between the different actors, which is the root for capture and corrupt opportunities.

    About the Author: Frédéric Boehm holds a Ph.D. in economics from the FU Berlin.

  • Contribution 22: Regulatory Capture Revisited

    Author: Frédéric Boehm. Working Paper. July 2007

    Abstract: Regulation is widely considered as the key issue in reforms of public service sectors. But it has been pointed early to the problem that regulatory capture could undermine the stated aims of the reforms. This paper reviews the concept and the literature of regulatory capture under the special focus of public service sectors. Although mentioning corruption as an important mean way of capture, these theories fall short in analysing corruption in detail. The paper thus widens the concept of regulatory capture by introducing recent insights from the economics of corruption. Above all, the black box of corrupt transactions is opened, enabling thereby to understand the channels through which capture occurs. Also, the analysis is extended to different types of corrupt relationships between the actors involved in regulatory processes. By doing so, the paper detects the weak points of regulation and presents some avenues for anti-capture policy measures.

    About the Author: Frédéric Boehm holds a Ph.D. in economics from the FU Berlin.

  • Author: Sope Williams. Spring 2007

    Abstract: This article sets out the background to the Bank’s procurement regulatory framework, offers an introduction to the Bank’s anti-corruption policy, and then critically examines the exclusion and debarment measures as used by the Bank. The article concludes that the costs of improving the effectiveness of the debarment policy may outweigh any benefits, and the limitations on the debarment mechanism may need to be accepted as inherent in the nature of the debarment mechanism.

    About the Author: Sope Williams is a lecturer in law at the University of Nottingham, U.K., and a member of the Public Procurement Research Group.

  • Authors: Mathias Nell and Johann Graf Lambsdorff. CeGE Discussion Paper, No 59, February 2007.

    Abstract: Corrupt arrangements are characterized by a high risk of opportunism: double-dealing, whistle-blowing and extortion are significant uncertainties for participants in corrupt transactions. This paper demonstrates how legislators may use an asymmetric design of (criminal) sanctions and leniency programs to amplify these inherent risks, thereby destabilizing corrupt arrangements. It is also shown that asymmetric penalties and (ex-ante) leniency do not necessarily interfere with the goal of deterrence and may be a useful tool to disband the ‘pact of silence’ characteristic of corrupt arrangements. In particular, we show that bribe-takers should less be penalized for taking and more for reciprocating a bribe. Likewise, bribe-givers should be punished for giving bribes, but not for accepting the bribetakers’ reciprocity.

    About the Authors: Johann Graf Lambsdorff holds a chair position in economic theory at the University of Passau, Germany and is senior research consultant for Transparency International. He has published on corruption, institutional economics and monetary economics.
    Mathias Nell is research assistant at the Chair for Economic Theory at the University of Passau. His doctoral thesis deals with corruption, law, and compliance.

  • Author: Johann Graf Lambsdorff. Discussion Paper of the Economics Faculty of Passau University, No. V-34-05, 2005, modified version in: Susan Rose-Ackerman (Editor): "International Handbook on the Economics of Corruption", 2006.

    Abstract: Data on the perceived levels of corruption from a cross-section of countries has been introduced fruitfully into recent empirical research. This paper reviews studies on the consequences and causes of corruption. It includes research on the impact of corruption on investment, GDP, institutional quality, government expenditure, poverty, international flows of capital, goods and aid. Causes of corruption focus on absence of competition, policy distortions, political systems, public salaries as well as an examination of colonialism, gender and other cultural dimensions.

    About the Author: Johann Graf Lambsdorff holds a chair position in economic theory at the University of Passau, Germany and is senior research consultant for Transparency International. He has published on corruption, institutional economics and monetary economics.

  • Authors: Mathias Nell and Johann Graf Lambsdorff. In: Martin Kreutner (Editor): "The Corruption Monster: Ethik, Politk und Korruption", 2006.

    Abstract: This article discusses several approaches of anti-corruption, highlights their potential deficiencies and shows other avenues for reform.

    About the Authors: Johann Graf Lambsdorff holds a chair position in economic theory at the University of Passau, Germany and is senior research consultant for Transparency International. He has published on corruption, institutional economics and monetary economics.
    Mathias Nell is research assistant at the Chair for Economic Theory at the University of Passau. His doctoral thesis deals with corruption, law, and compliance.

  • Author: Hady Fink. Discussion Paper of the Economics Faculty of Passau University, No. 44-06, January 2006.

    Abstract: Instead of designing anti-corruption reform by focussing on a blueprint of pillars of integrity, this study takes a grassroots perspective towards corruption and reform. Systematic expert interviews have been conducted in 2005 and these were collated into a comprehensive study of the challenges facing the Columbian society. While emphasis can be derived for reform, it becomes apparent that it is arduous to identify simple trends in levels of corruption, as they were recently suggested by the Corruption Perceptions Index.

    About the Author: Hady Fink holds degress in economics and cultural studies from the University of Passau.

  • Authors: Michael Schinke and Johann Graf Lambsdorff. Discussion Paper of the Economics Faculty of Passau University, No. 43-06, January 2006.

    Abstract: Corruption among central banks induces distorted policies by, first, increasing the inflation bias and, second, potentially inducing a pro-cyclical adjustment of employment. In response to a negative supply shock a corrupt central banker is tempted to decrease money supply. In this case, he pretends an ultraconservative attitude while in reality he is driven by self interest. If societies with extreme tastes (relating only to inflation or employment) are not governed by central bankers with similar preferences, corruption might be tolerated as an instrument of bringing factual policies more in line with its public desire. This finding provides a warning signal against the choice of non-representative central bankers.

    About the Author: Michael Schinke is research assistant at the Chair for Economic Theory at the University of Passau. His doctoral thesis deals with corruption and central banks.

  • Contribution 15: Korruption in Deutschland - Reformmaßnahmen (in German)

    Authors: Mathias Nell and Johann Graf Lambsdorff. Wirtschaftsdienst, December 2005.

    Abstract: This paper discusses legal reform measures in Germany, in particular whistle-blower protection, ombudsmen systems, and corporate (criminal) liabilty.

    About the Authors: Johann Graf Lambsdorff holds a chair position in economic theory at the University of Passau, Germany and is senior research consultant for Transparency International. He has published on corruption, institutional economics and monetary economics.
    Mathias Nell is research assistant at the Chair for Economic Theory at the University of Passau. His doctoral thesis deals with corruption, law, and compliance.

  • Authors: Mathias Nell and Johann Graf Lambsdorff. Discussion Paper of the Economics Faculty of Passau University, No. 41-05, December 2005.

    Abstract: Corrupt arrangements are characterized by a high risk of opportunism. Moreover, denunciation and extortion add another layer of uncertainty for participants in corrupt transactions. This paper demonstrates how legislators can use an asymmetric design of criminal sanctions to amplify these inherent risks, thereby destabilizing corrupt arrangements. It is also shown that asymmetric penalties do not necessarily interfere with the goal of deterrence and that immunity may be a useful tool to disband the "pact of silence" characteristic of corrupt arrangements.

    About the Authors: Johann Graf Lambsdorff holds a chair position in economic theory at the University of Passau, Germany and is senior research consultant for Transparency International. He has published on corruption, institutional economics and monetary economics.
    Mathias Nell is research assistant at the Chair for Economic Theory at the University of Passau. His doctoral thesis deals with corruption, law, and compliance.

  • Author: Simone Menshausen, August 2005

    Abstract: In 1999 Chinese authorities began investigating what turned out to be one of the largest cases of smuggling and corruption since the founding of the PRC. This case study examines how smugglers in the coastal city of Xiamen colluded with customs and tax officials evading 11 billion RMB in taxes in an operation that involved around 600 people including police, military, Communist party secretaries, directors of the state-owned banks, town official as well as high-ranking government officials.

    About the author: Simone Menshausen studied economics and Chinese language at Passau University and Shanghai University (PR China). This case study was part of a diploma thesis written under supervision of Prof.Dr. Johann Graf Lambsdorff.

  • Author: Raphaela Seubert, March 2005

    Kind of Publication: Discussion Paper

    Abstract: Where within the firm should legal liability be situated? How can firms be assisted to credibly commit to business ethics and corporate abstinence from corruption? Based on a property rights framework, this paper argues for simultaneous liability of those highest on the corporate power ladder (via e.g. corporate liability) and of bribing lower-level employees (via individual legal liabilities). This motivates those in power to provide valuable voice-options to subordinates, protecting the latter from being misused as fall guys. Given such voice-options, however, superiors must conversely be shielded from being victimized. Simultaneous high- and low-level liability thus can enhance the effectiveness of international corporate anti-corruption laws.

    About the Author: Having obtained a master's degree in business economics at Passau University, Germany, Raphaela Seubert has served as research and teaching associate for the economics department of Jena University, Germany. She currently is a doctorate candidate at the economics faculty of the University of Passau.

  • Author: Vartuhi Tonoyan, March 2004

    Kind of Publication: Conference Paper

    Abstract: High-trust societies are often associated with lower levels of corruption. This holds true only for generalized trust, i.e. trust in anonymous others and institutions. The opposite is true for particularized trust, i.e. trust which is person and situation specific. Cross-cultural comparison corroborates this adverse association, suggesting that particularized trust represents the “dark side of trust”. A possible reason for this finding rests with the need of self-employed for securing economic exchange. Lacking generalized trust is substituted for particularized trust, for example by engaging in business networks. This, in turn, can be a breeding ground for corruption.

    About the Authors: Vartuhi Tonoyan studied economics at the Yerevan State University of National Economy, Armenia. She is a research fellow at the Mannheim Institute for Small Business Research, Germany and a doctoral candidate at the Department for International Management at the University of Mannheim.

  • Authors: Matthias Schramm and Markus Taube, September 2002

    Kind of Publication: Article

    Abstract: This study examines the phenomenon of corruption in China using the instrument of the new institutional economics and thus attempts to illuminate the institutional foundations of corruption in China. To do this it will contrast the traditional understanding of corruption from the perspective of a personally unbound legal system with an analysis of a system where socio-economic interaction takes place within personally bound systems of order: the guanxi networks. It will be shown, that these networks offer a transaction cost minimising solution (best practice) for the problem of order that corrupt transactions are confronted with.

    About the Authors: Matthias Schramm studied economics and Mandarin at Duisburg University and Wuhan University (PR China). Since 2001 he is Assistant at the Faculty of Economics, Institute of East Asian Economics at the University of Duisburg and Ph.D. student at the Faculty of Agricultural Economics at the Univesity of Göttingen.
    Prof. Dr. Markus Taube studied sinology and economics in Trier and Wuhan (PR China). Since April 2000, he is professor for the East Asian Economy and China at the University of Duisburg.

  • Authors: Johann Graf Lambsdorff and Sitki Utku Teksoz, May 2002

    Kind of Publication: Discussion Paper No. 113, Volkswirtschaftliches Seminar, University of Goettingen

    Abstract: Because corruption must be hidden from the public and is not enforced by courts it entails transaction costs, which are larger than those from legal exchange. This suggests that corrupt contracts are primarily relational contracts where legal exchange serves as a basis for sealing and enforcing corrupt agreements. Legal exchange not only provides for corrupt opportunities, but for the necessary enforcement mechanisms. Examples of such legal exchange are long-term business exchange, belonging to the same firm or political party or being embedded in social relationships. The latter may even comprise the engagement in charitable institutions. Reform should not only focus on limiting opportunities for corrupt behavior but also on impeding the enforcement of corrupt agreements.

    About the Authors: Sitki Utku Teksoz is a graduate student from Bogazici University, Istanbul, Turkey. The paper was written while Mr Teksoz was a visiting researcher at the University of Göttingen.

  • Author: Johann Graf Lambsdorff, January 2001

    Kind of Publication: Discussion Paper No. 9, Center for Globalization and Europeanization, University of Goettingen

    Abstract: The objectives of government are pivotal to understanding the diverse negative effects of corruption on public welfare. Corruption renders governments unable or unwilling to maximize welfare. In the first case, it distorts agents' decisions and limits the contractual space available to agents and the government, acting as a benevolent principal. In the second case, a corrupt principal creates allocative inefficiencies, cripples its credible commitment to effective policies, and opens the door to opportunism.

    About the Author: Prof. Dr. Johann Graf Lambsdorff has obtained a chair position in economic theory at the University of Passau, Germany. He is senior research consultant for Transparency International. He obtained his PhD in Economics in 1994 and his habilitation in 2000 at the economics faculty of the University of Goettingen. He holds further degress in Mathematics and Sociology.

  • Authors: Jens Chr. Andvig, Odd-Helge Fjeldstad, Inge Amundsen, Tone Sissener and Tina Sřreide

    Kind of Publication: Report, commissioned by the Norwegian Agency for Development Co-operation, NORAD

    Abstract: This survey is an overview of contemporary academic corruption research. It includes economic models and also political and anthropological approaches. To make the survey accessible for a multidisciplinary audience, the most abstract and technical parts of the literature are presented in a non-technical way, emphasising the intuition behind the models. The main objective is to present research that is relevant for foreign aid policies to developing countries. In this sense the survey intends to be useful - and used - by researchers, students, development practitioners and aid officials.

    About the Authors: Odd-Helge Fjeldstad is an economist at the Chr. Michelsen Institute (CMI), Jens Chr. Andvig is economist at the Norwegian Institute of International Affairs (NUPI). Tina Sřreide is also an economist, Inge Amundsen is political scientist and Tone Sissener a social anthropologist at CMI.

  • Author: Richard G. Dudley, October 2000

    Kind of Publication: Draft Paper

    Abstract: System dynamics models of corruption can provide a means of clearly presenting, in a holistic way, the interacting components of corrupt systems. One preliminary model employs the idea that 'amount of corruption' is part of reinforcing loops linked to 'amount of bureaucratic red tape.' In this view, corruption is also linked to lowered economic openness, and a weak legal system. Other models include factors such as the likelihood a bribe is paid and the psycho-social aspects of corruption within the work environment. Taken together these models indicate that system dynamics modeling approach has potential for elucidating corrupt systems and cures.

    About the Author: Dr. Richard Dudley is a fishery biologist with more than 20 years experience working with developing country scientists and managers. His interest in corruption research results from his experiences with international development projects.

  • Author: Johann Graf Lambsdorff, November 1999.

    Kind of Publication: Transparency International Working Paper.

    Abstract: Data on the perceived level of corruption from a cross-section of countries have been fruitfully introduced into empirical research lately. This study reviews a large variety of studies on the consequences and causes of corruption. It includes research on the impact of corruption on investment, GDP, institutional quality, government expenditure, poverty and international flows of capital, goods and aid. Research on the causes of corruption focuses on the absence of competition, policy distortions, political systems, public salaries as well as an examination of colonialism, gender and other cultural dimensions.

    About the Author:Prof. Dr. Johann Graf Lambsdorff has obtained a chair position in economic theory at the University of Passau, Germany. He is senior research consultant for Transparency International and author of the TI-Corruption Perception Index. He obtained his PhD in Economics in 1994 and his habilitation in 2000 at the economics faculty of the University of Goettingen. He holds further degress in Mathematics and Sociology.

  • Author: Jerome S. Fons, January 1999

    Kind of Publication: Conference Paper

    Abstract: Poor transparency can often be found in societies characterized by unchecked economic power or those with corrupt business practices. These conditions prevail in many banking systems of the Asian countries affected by the financial crisis. This viewpoint is supported empirically by reporting a strong association between the Transparency International Corruption Perceptions Index and Moody's bank financial strength ratings (BFSRs) and country ceiling ratings. We suggest that calls to increase transparency may prolong the crisis by further harming investor confidence and should wait until confidence returns and the banking systems stabilize.

    About the Author: Jerome S. Fons is a Managing Director in the Banking and Sovereign Group at Moody's Investors Service in New York. He is currently responsible for Moody's ratings on East Asian banks, including Japanese banks. Prior to joining Moody's in 1990, Mr. Fons was an Economic Advisor at Chemical Bank, New York and an Economist with the Federal Reserve Banks of New York and Cleveland. Mr. Fons holds a BA in Economics from San Diego State University and a Ph.D. in Economics from the University of California at San Diego.

  • Authors: Björn Frank and Günther G. Schulze, July 1998.

    Kind of Publication: Discussion Paper.

    Abstract: Corruption is always kept secret and therefore individual behavior of corrupt agents is almost impossible to observe systematically in real life. We attempt to obtain new insights by creating a controlled experimental environment in which agents can decide to be loyal or corrupt. While we also study the impact of education (economists vs non-economists) and gender on corruptibility, the most interesting result for policy design concerns the agents' wages. It is a common policy recommendation to increase wages as a measure to combat corruption. The results of our study suggest that this will not work with agents who are not monitored.

    About the Authors: Bjoern Frank and Guenther Schulze are members of the economics faculty of the University of Hohenheim and University of Konstanz, respectively.

  • Author: Robert Klitgaard, November 1997

    Kind of Publication: Reprint of a contribution to Finance and Development, March 1998

    Abstract: International cooperation can help individual countries develop both the will and the capacity to fight corruption. The paper supplies some examples. In addition, the paper proposes several new initiatives where international cooperation could play crucial roles. One idea is to sponsor regional diagnostic studies. Another is an international "contest" for the best national strategies to reduce corruption. Regional seminars would broach the idea of a strategy against corruption, with examples, and technical assistance would help countries that wished to enter the contest to design their proposals. The winners (perhaps one or two per continent) would be rewarded with seven years of sustained and additional aid. The idea is to dramatize the fight against corruption, and to emphasize that corruption is a problem of policies and management even more than it is one of ethics or cultural change.

    About the Author: Robert Klitgaard is Dean and Ford Distinguished Professor of International Development and Security, The RAND Graduate School.

  • Author: Johann Graf Lambsdorff, September 1997

    Kind of Publication: Press release to a paper forthcoming in the European Journal of Development Research, Vol. 10, No. 1, 1998

    Abstract: The degree of corruption of importing countries can be shown to affect the trade structure of exporting countries. Whereas Sweden is having disadvantages with corrupt counterparts, the exports of Belgium, France, Italy, the Netherlands and South Korea are positively affected by the level of corruption of importing countries. Since geographic, sectoral, idiomatic and other influences are accounted for, it is argued that these findings are due to a differentiated inclination of exporters to offer bribes.

    About the Author:Prof. Dr. Johann Graf Lambsdorff has obtained a chair position in economic theory at the University of Passau, Germany. He is senior research consultant for Transparency International and author of the TI-Corruption Perception Index. He obtained his PhD in Economics in 1994 and his habilitation in 2000 at the economics faculty of the University of Goettingen. He holds further degress in Mathematics and Sociology.