(From Raj Nallari and Indira Iyer's lecture notes)

The literature on corruption is large and growing. In this and upcoming Fridays Academy comments we will attempt to capture the essence of the arguments and provide some empirical evidence on the impact of corruption on growth and poverty reduction. Corruption, which includes bribery, rent-seeking, extortion, embezzlement, is perceived as a major problem facing many countries.  Corruption has therefore been variously defined to mean ‘the misuse of public office for private gain.’   This does not mean that there is no corruption in the private sector because this is quite common in (private) financial firms.  But, corruption is more severe in the public sector than in the private sector.  One of the first known articles on corruption and its punishment is in Kautilya’s Arthasastra (dating back to 14 BC).  Corruption is found to be closely inter-related with a country’s social norms, formal and informal rules and culture as well as legal environment in a country.  No matter what, corruption connotes illegal or improper (moral) behavior and is treated as a ‘socially and culturally deviant behavior.’  From political science point of view, high level of corruption coincides with political instability and tends to reduce citizen’s trust and faith in institutions.

Measurement of Corruption

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