Corruption, institutions, and economic development

Many scholarly articles on corruption give the impression that the world is populated by two types of people: the 'sanders' and the 'greasers'. The 'sanders' believe that corruption is an obstacle to development, while the 'greasers' believe that corruption can (in some cases) foster development. This paper takes a critical look at these positions. It concludes that the evidence supporting the 'greasing the wheels hypothesis' is very weak and shows that there is no correlation between a new measure of managers' actual experience with corruption and GDP growth. Instead, the paper uncovers a strong negative correlation between growth in genuine wealth <italic>per capita</italic>--a direct measure of sustainable development--and corruption. While corruption may have little average effect on the growth rate of GDP <italic>per capita</italic>, it is a likely source of unsustainable development. Copyright 2009, Oxford University Press.