Corruption, Productivity and Transition

The level of productivity is correlated across countries with measures of (lack of) corruption, but this appears to be due to a common association of these variables with measures of social infrastructure, here measured by a combination of governance indexes labelled "rule of law" and "government effectiveness". Econometric use of instruments establishes that causation runs from social infrastructure to productivity. Socialism has had a positive direct effect on productivity but one that is dominated by a negative indirect effect via social infrastructure.