Lootcers, Rent-Scrapers, and Dividend-ollectors: Corruption and Growth in Zaire, South Korea, and the Philippines

Abstract

Does corruption systematically reduce economic growth? Is so, are countries with high levels of corruption likely to be among those with relatively low rates of growth while countries with low levels of corruption are likely to among those with high rates of growth? According to a recent study by Paolo Mauro, the answer ought to be yes.' Using a data set that ranked 68 countries on a scale of 1 to 10 in terms of corruption, bureaucratic red tape, and judicial honesty, Mauro demonstrated that, when controlling for a variety of economic and sociopolitical factors, the relationship between corruption and growth is negative, which implies that as a group highly corrupt countries should have significantly lower growth rates than more honest countries. Mauro's rigorous application of quantitative methods yields results that are in many ways convincing. Yet, his finding that the corruption-growth relationship is unilinear and negative is theoretically controversial. His finding is problematic in part because it relies on a definition of corruption that is at odds with a significant portion of the literature. The problem is less in Mauro's formal definition of what constitutes corruption. Instead, the problem lies in his implicit assumption that all forms of corruption are approximately equal in their impact on growth. Whereas Mauro treats corruption as an undifferentiated phenomena, students of corruption have long argued that the impact of corruption depends not simply on its amount, but also on its form. Thus, going back to the early 1960s, scholars such as Nathaniel H. Leff argued that in certain contexts corruption might help overcome obstacles to