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       Measuring corruption
• Transparency international (TI)
  – Corruption perception index
     • The CPI ranks more than 150 countries by their perceived
       levels of corruption, as determined by expert assessments
       and opinion surveys.
  – Global corruption barometer
     • public opinion survey, 59,661 respondents in 63 countries.
  – Bribe payers index 2006
     • 30 leading exporting countries, responses of 11,232 business
       executives from companies in 125 countries
Corruption perception index 2006
CPI 2006: Eastern Europe and Former Soviet Union
Global corruption barometer 2005
 Does corruption reduce economic
• Corruption might raise economic growth (Leff,
  1964; Huntington, 1968)
  – Help avoiding bureaucratic delays in countries with
    cumbersome regulations
  – Encourage bureaucrats to work harder
• Corruption reduces economic growth
  – Discourage investing in long-run projects (Mauro,
  – Distort allocation of resources – less in transparent
    projects (education) more in hard-to-monitor projects
    (construction) – Shleifer and Vishny (1993)
   Empirical investigation (Mauro,
• Support the hypothesis that corruption
  reduces economic growth
• Reduction of corruption by one standard
  deviation leads to
  – Increase in investment rate by 2.9% per year
  – Increase in economic growth by 1.3% per
• The result holds regardless of how
  cumbersome the laws are
   What are the determinants of
• Triesman, 2000
  – Whether country was democratic for decades
  – openness to trade
  – cultural and institutional traditions
    • Protestantism
    • Colonial origin
  – Economic development
Specific instances of corruption
• Height distribution of French males was
  influenced by minimum height for
  conscription (Quetlet, 1846)
• Political connections influenced stock
  prices of private companies (Fisman
• Corruption and sport (Duggan and Levitt,
Corruption and Sumo (Duggan and
           Levitt, 2002)
• Non-linearity in payoffs:
  – normally a win increase ranking of an athlete
    by 3 spots
  – the 8th win increase ranking by 11 spots
• Irregular form of distribution of wins
  – distribution of wins closely follows binomial
  – there are unusually high frequency of winning
    the 8th win
         Collusion or effort?

• H0: unusually high percentage of winning
  the 8th match is due to collusion between

• H1: wrestler who has 7 wins exerts more
  effort to get the 8th win
     Indirect evidence in favor of
• The next time that those same two wrestlers
  face each other, it is the opponent who has an
  unusually high win percentage
• Win rates for wrestlers on the bubble vary in
  accordance with factors predicted by theory to
  support implicit collusion.
  – success rates for wrestlers on the bubble rise
    throughout the career
  – success rates for wrestlers on the bubble fall in the
    last year of a wrestler's career.
• Match rigging disappears during times of
  increased media scrutiny
      Indirect evidence in favor of
• Some wrestling stables (known as heya) appear
  to have worked out reciprocity agreements with
  other stables: wrestlers from either stable do
  exceptionally well on the bubble against one
• Wrestlers identified as "not corrupt" do no better
  in matches on the bubble than in typical
  matches, whereas those accused of being
  corrupt are extremely successful on the bubble.
• Corruption reduces economic growth
  through negative impact on investment
• Cultural and institutional traditions have
  long lasting impact on corruption levels
• Studies of specific mechanisms of
  corruption in various areas of life help to
  understand how corruption distort

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