The Strategist

World Bank finds correlation between size of country and level of corruption

06/04/2019 - 11:50

Large countries are predisposed to a higher level of corruption, concluded researchers of the World Bank (WB), who analyzed data from surveys of entrepreneurs. The World Bank recommends large states to monitor activities of officials stricter, and to punish corrupt officials more severely. Having issued such an ambiguous recommendation, the WB experts admitted that they could not explain the mechanism of the correlation revealed by them. via flickr via flickr
In a new working paper, World Bank experts remind that there is still no reliable data to understand why some countries are more susceptible to corruption than others. The WB tried to link this phenomenon with the size of countries by analyzing data from polls of representatives of almost 48 thousand companies from 135 countries (experience with officials from 2008 to 2016). The researchers both general corruption (amount of bribes paid by the business “for everything to work”), and small corruption (facilitate specific issues). Sizes of the countries were estimated both by the population size and by the area of their territory.

The WB notes that the existing models of corruption explain the phenomenon either in terms of crime and punishment, or with interaction between the principal and the agent. In the first case, it is assumed that the official chooses the optimal level of corruption, correlating the benefits (bribes) and costs (the risk of being caught, losing the job and benefits). In this model, corruption will be lower with higher salaries of officials, greater inevitability and severity of punishment.

In the second model, corruption increases when the principals (citizens) do not have enough information to control corrupt behavior of agents (politicians). Imperfect monitoring encourages officials to abuse powers and introduce potentially corrupt standards. In this case, the way to fight is greater control of power by society and an increase in horizontal competition within the government itself. At the same time, the size of the country, according to economists of the World Bank, correlates with the quality of management. The advantages of fighting corruption for large countries can be lower costs for public goods per capita, a more efficient tax system, lower defense expenditures per capita, higher productivity due to specialization, and greater opportunities for redistributing income. At the same time, the large cultural and linguistic heterogeneity of large countries can make it difficult to achieve consensus for reform, and administrative costs grow in proportion to the size of the territory. The first group of factors in this model will help reduce the level of corruption due to more efficient bureaucracy, better law enforcement and the quality of institutions. On the contrary, the second will lead to deterioration in management quality and increase corruption risks.

Empirical data showed that the level of corruption, both general and minor, is higher in large countries, the World Bank states. For example, in a country the size of Namibia, the level of corruption will be 0.28 points (or 23% of the average) lower than in a more populated state comparable to Morocco. Therefore, large countries have to strengthen monitoring and severity of punishment for corrupt officials more than small countries, the WB notes. Having issued such an ambiguous recommendation, the researchers also admitted that they could not identify the mechanism responsible for the sort of correlation they found.