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Is corruption an efficient grease?

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  • Pierre-Guillaume Méon
  • Laurent Weill

Abstract

This paper tests whether corruption may be an efficient grease in the wheels of an otherwise deficient institutional framework. It analyzes the interaction between aggregate efficiency, corruption, and other dimensions of governance for a panel of 69 countries, both developed and developing. Using two measures of corruption and two other aspects of governance, we observe that corruption is less detrimental to efficiency in countries where institutions are less effective. It may even be positively associated with efficiency in countries where institutions are extremely ineffective. We thus find evidence for the “grease the wheels” hypothesis in its weak and strong forms.

Suggested Citation

  • Pierre-Guillaume Méon & Laurent Weill, 2010. "Is corruption an efficient grease?," ULB Institutional Repository 2013/92603, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:ulb:ulbeco:2013/92603
    Note: SCOPUS: ar.j
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    More about this item

    Keywords

    governance; corruption; income; aggregate productivity; efficienc;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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