An Economic View of Corruption

Abstract

Corruption is an economic issue that relates to micro transactions and to economies. An economic definition is suggested that separates corruption from crime in general and theft in particular. Different definitions of corruption produce different results and some of these are discussed, particularly that of the World Bank. Corruption is seen as a different way of attempting to gain economic rents. Attitudes towards corruption are found to differ in various countries. Corruption is shown to distort markets because they do not clear on the basis of transparent price signals, and purchasers pay more for goods and services than necessary. Empirical studies show that corrupt economies as a whole also suffer through lower investment and welfare loss. Comparative research has produced a corruption perception index covering 52 countries. Some practical measures to combat corruption are reviewed and it is concluded that cures for corruption, like a virus or cancer, can be found.