The Economics of Corruption and the Corruption of Economics: An Institutionalist Perspective

Abstract

Corruption is now a popular topic in the social sciences.This expansion of interest is evident in economics and elsewhere, where a large number of articles on this theme have been published in leading journals.Some organizations publish indicative data on corruption.For example, Transparency International publishes a widely cited -Corruption Perceptions Index‖ for most countries, and these data are frequently used in statistical analyses of economic performance.Transparency International data for 2005 suggest that corruption is -rampant‖ in more than 70 countries.1 These include populous and fast-growing economies such as China and India, which account for a large and rapidly increasing share of the global economy.Recent empirical studies indicate that corruption has a negative effect on economic performance (Shleifer and Vishny 1993; Mauro 1995; Aidt 2003; Jain 2001; Pelligrini and Gerlagh 2004).The World Bank (1997) has identified corruption as -the single greatest obstacle to economic and social development.‖2However, much less attention so far, has been devoted to the concept of corruption, its meaning and its definition.This means much more than the lack of tidy terminology.As Arvind Jain (2001, 73) observes: -While it may appear to be a semantic issue, how corruption is defined actually ends up determining what gets modelled and measured.‖Similarly, Toke Aidt (2003, F623) remarks that -the definition of the concept determines what gets modelled and what empiricists look for in the data.‖It is argued here that this conceptual lacuna in the literature has led some authors -particularly economists -to adopt a narrow and inadequate definition of corruption that has led to skewed empirical measures and biased policy recommendations.

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