Corruption & the Wealth of Nations

Abstract

Corruption is often cited as a fundamental obstacle to economic development, making anticorruption initiatives an important policy objective. However, there is little convincing empirical
evidence concerning the benefits of anti-corruption reform. We fill this gap by identifying a set of
countries that experienced a sustained increase in corruption control and compare the outcomes of
this group with a counterfactual set of similar countries that experienced no such change. We find
some evidence that corruption reforms significantly raise real GDP per-capita. We also find that
many corruption reforms are temporary, emphasizing the need to focus on sustainability when
engaging in corruption reform. We document for the first time a strong asymmetry of results, as
countries that experience a large discrete increase in corruption do not suffer a significant decline in
real GDP per-capita.

Keywords: Corruption, Anticorruption, Reform, Economic Performance

JEL Classification: D73, P41, O4, O47