The Evolution of Corruption and Optimal Level of Corruption Reduction: Evidence from Cross-Country Studies

Abstract

The causes of corruption are associated with particular historical, cultural tradition, level of economic development, political institutions, and government policies. History can repeat itself, and historical patterns corruption emerged in stages as country total productivity increases. It becomes a conventional wisdom that poor country is corrupt than rich countries and so does Europe dated back few centuries. This chapter discusses the extent to which corruption as an evolutionary phenomenon is driven by institutional development in the context of the modern African states. Second, the chapter examines the optimal level in corruption reduction by reconstructing the history of institutional development using GDP as a proxy measure of institutional and economic development in Africa in the context of market economy. The evolution of corruption is observed while focusing on cross-sectional account of GDP as determinant of corruption level. The chapter uses perceived corruption index and group countries as pre-modern, modern, and post-modern corruption countries and reconstructs dense series of countries for period 1998–2009. As the GDP expand, society leaps from one rudimentary stage of corruption to the next stage where corruption tends covert with higher rewards before they are leveled-off when GDP growth accelerates. In other word, the evolution of corruption inverts a U-shape by using world historical experience and much of the predictive or explanatory power rests with countries level of GDP. Reduction of corruption is costly at pre-modern and modern corruption stages. At no time corruption is able to be reduced to a zero and society must accept some level of corruption with minimum marginal costs.