BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 20/2008:
Is corruption an efficient grease?
Pierre-Guillaume Méon ()
and Laurent Weill
Abstract: This paper tests whether corruption may act as an
efficient grease for the wheels of an oth-erwise deficient institutional
framework. We analyze the interaction between aggregate efficiency,
corruption, and other dimensions of governance for a panel of 54 developed
and developing countries. Using three measures of corruption and five
measures of other aspects of governance, we observe that corruption is
consistently detrimental in countries where institutions are effective, but
that it may be positively associated with efficiency in countries where
institutions are ineffective. We thus find evidence of the grease the
wheels hypothesis.
Keywords: governance; corruption; income; aggregate productivity; efficiency; (follow links to similar papers)
JEL-Codes: C33; K40; O43; O47; (follow links to similar papers)
43 pages, November 21, 2008
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