Determinants of Corruption in Developing Countries: The Limits of Conventional Economic Analysis

Corruption takes place when public officials break the law in pursuit of their private interest. But public officials can break different laws in different ways with different implications for the public good. The factors driving corruption and the effects of corruption can therefore vary widely. Understanding the causes and consequences of corruption is particularly important in developing countries, which almost without exception suffer from high levels of corruption. The virtual uniformity of this evidence strongly suggests that developing countries must share some powerful common drivers of corruption that are different from those that affect advanced industrial countries. At the same time, the very diverse economic performance of developing countries suggests that not all developing countries suffer from the same types of corruption. These two observations, summarized in our first section, provide the backdrop to my analytical investigation. I begin this investigation by identifying the drivers of corruption implicit in most conventional neoclassical economic analysis of the topic. Although these drivers are undoubtedly important in many contexts, I next argue that a number of other drivers of corruption may be more important in developing countries. These countries have several critical structural features that are recognized in the broader social science literature but the implications of these features for the economic analysis of corruption have not been adequately developed. We argue that the types of corruption generated by these structural features of developing countries are much less amenable to the types of anti-corruption measures that are prescribed by the conventional analysis of corruption. I then use this analysis to provide an alternative classification of types of corruption in developing countries and suggest that policy has to be appropriate to the drivers of corruption most relevant in particular countries. The implications of this analysis for anti-corruption strategies in developing countries are discussed in the final section.