Causes of Corruption

Topics: Regression analysis, Transparency International, Econometrics Pages: 27 (9397 words) Published: June 14, 2011
Econ Gov (2008) 9:245–263 DOI 10.1007/s10101-007-0033-4 O R I G I NA L PA P E R

Causes of corruption: a survey of cross-country analyses and extended results Lorenzo Pellegrini · Reyer Gerlagh

Received: 30 September 2005 / Accepted: 20 October 2006 / Published online: 23 February 2007 © Springer-Verlag 2007

Abstract We survey and assess the empirical literature on the sources of corruption Thanks to the improved availability of data, we are able to produce an improved cross-country econometric model to test well-established and more recent hypotheses jointly. We do not find that the common law system, or a past as a British colony predicts corruption. Our results support cultural theories on the causes of corruption, and suggest that a medium-long exposure to uninterrupted democracy is associated with lower corruption levels, while political instability tends to raise corruption. Our results also suggest that the diffusion of newspapers helps to lower corruption levels. Keywords Corruption · Ethnolinguistic fractionalization · Democracy · Political instability JEL classification D72 · H11 · H50 · K42 · O17

L. Pellegrini (B ) Institute of Social Studies (ISS), Kortenaerkade 12, 2518 AX The Hague, The Netherlands e-mail: L. Pellegrini · R. Gerlagh Institute for Environmental Studies (IVM), Vrije Universiteit Amsterdam, Amsterdam, The Netherlands R. Gerlagh University of Manchester, School of Social Sciences, Economics, Manchester, UK


L. Pellegrini, R. Gerlagh

1 Introduction Corruption is a widespread phenomenon affecting all societies to different degrees, at different times. On the one hand, as corruption scandals have repeatedly shown, bribes are common in all countries notwithstanding differences in income levels and law systems, as they are common in democracies and in dictatorships. Recent scandals over corruption have shown that also supposedly free-from-corruption societies are affected. The ELF scandal demonstrated that corruption was rampant in the management of the French state owned enterprise.1 The following year, a corruption charge against President Chirac could not be courted because he was shielded by immunity as the head of the state.2 Also in Germany, the CDU and former Chancellor Helmut Kohl were fined for receiving illegal campaign funding.3 Among Nordic countries (which rank always among the less corrupt in international comparisons), Swedish and Norwegian managers of state owned companies have been found to be involved in bribe-taking.4 Corruption is not rare even during humanitarian emergencies. According to Transparency International, an NGO who strives to expose corruption, relief efforts in the aftermath of the South East Asian Tsunami earthquake of 2004 were hampered by corruption.5 Still, different countries are marked by large differences to the extent of corruption. In some societies, no transaction is finalized without corruption having an effect, while in other countries it is considered an exception and rarely tolerated. Figure 1 presents corruption levels worldwide; the figure shows that corruption tends to be pervasive especially in developing countries. At the same time, numerous studies have demonstrated the pernicious effects of corrupted practices on—among other things—economic growth, investment, human development and environmental policies. The relevance of corruption for welfare levels requires the understanding of the sources of corruption (and of differences across countries) and the development of policies to address the phenomenon of corruption. Hard evidence of corruption is intrinsically difficult to obtain, because of the secrecy surrounding illegal deals, but there are several ways to obtain proxies of the extent of corruption. One such source comes from the pool of international interviews commissioned for the Global Corruption Perception Barometer (Transparency International, 2004). From the barometer, we can see that while around 90% of...
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