Theoretical analysis reveals government structure and secrecy drive high corruption costs in developing nations, suggesting weak agency control severely impairs economic growth.
This paper presents two propositions about corruption. First, the structure of government institutions and of the political process are very important determinants of the level of corruption. In particular, weak governments that do not control their agencies experience very high corruption levels. Second, the illegality of corruption and the need for secrecy make it much more distortionary and costly than its sister activity, taxation. These results may explain why, in some less developed countries, corruption is so high and so costly to development.
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Shleifer et al. (1993) studied this question.
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