Why worry about corruption?

This paper focuses exclusively on corrupt public practices - illegal activities that reduce the economical efficiency of governments. It lists a number of possible causes and consequences of corruption, derived from review of recent empirical studies that use cross-country regressions to determine the strength of the links between corruption and its cause and consequences. Although data limitations subject empirical work to many uncertainties, these studies provide tentative evidence that corruption may seriously inhibit performance. The paper also presents recent evidence on the extent to which corruption affects investment and economic growth and on how it influences governments in choosing what to spend money on. It finds that corruption discourages investment, limits economic growth and alters the composition of government spending, often to the detriment of future economic growth.