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Thursday, May 03, 2007

Corruption


Recently a colleague of mine told me how he read about corporate corruption in Germany and its involvement in economic success. I asked him whether he believed any society could actually work without corruption.

Don’t get me wrong I hate corruption. I find it extremely unfair and sometimes inefficient. But I might hold that opinion because I am not on the receiving end.

Using CIA and transparency international data I regress log GDP per capita at PPP on a transparency score. As you can see richer countries are less corrupt, but the benefits of non-corruption at the top end are diminishing.

The problem with over-zealous countries is that they impose bureaucracies which are highly inefficient. Also corruption depends on the size of a state. More centralist states are a priori more transparent.

Let's face it corruption starts with the networks in which promotion depends on who you know.

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