Why some countries thrive despite corruption: The role of trust in the corruption–efficiency relationship

While it is widely accepted that corruption negatively affects economic growth, why some countries achieve rapid growth under rampant corruption remains a puzzle. This article sheds light on this issue by examining the role of trust in the corruption–efficiency relationship. It argues that in countries with a relatively low level of trust, corruption tends to be more predatory and inefficient than corruption in countries with a relatively high level of trust, which tends to be less predatory (or relatively more ‘efficiency-enhancing’). To illustrate their arguments, the authors first conduct a qualitative comparative case study of China and the Philippines. They then further subject their ideas to a quantitative test using a pooled data set of 65 countries in two time periods. Both their case study and statistical test support their general hypothesis that trust mitigates the negative effect of corruption on economic growth.