Development and Corruption

Abstract

Most of the world’s population live in countries that are corrupt according to Transparency International’s Corruption Perceptions Index. Despite significant progress in the fight against extreme poverty, sustained economic development has remained elusive for many countries. Is corruption the reason that so many countries remain poor? By increasing costs and uncertainty, and reducing benefits, corruption can act as a strong disincentive to economic activity. Corruption also distorts public spending decisions and undermines the quality of infrastructure. Reduced trust makes it harder for people to collaborate for mutual gain. However, some have argued that corruption can grease the wheels of an economy that is subject to poor governance and overregulation. This entry reviews the theory and evidence and concludes that corruption is harmful to economic development. While bribery may help some firms to overcome costly and inefficient regulation, corruption is a cause of red tape. The entry also discusses how corruption is harmful to sustainable and inclusive development.

Keywords: Corruption, Bribery, Development, Economic Growth, Entrepreneurship, Sustainable Development