This indicator measures the extent to which public power is exercised for private grain, including both petty and grand forms of corruption, as well as “capture” of the state by elites and private interests. It also measures the strength and effectiveness of a country’s policy and institutional framework to prevent and combat corruption.
Countries are evaluated on the following factors:
- The prevalence of grand corruption and petty corruption at all levels of government;
- The effect of corruption on the “attractiveness” of a country as a place to do business;
- The frequency of “irregular payments” associated with import and export permits, public contracts, public utilities, tax assessments, and judicial decisions;
- Nepotism, cronyism and patronage in the civil service;
- The estimated cost of bribery as a share of a company’s annual sales;
- The perceived involvement of elected officials, border officials, tax officials, judges, and magistrates in corruption;
- The strength and effectiveness of a government’s anti-corruption laws, policies, and institutions;
- Public trust in the financial honesty of politicians;
The extent to which:
- processes are put in place for accountability and transparency in decision-making and disclosure of information at the local level;
- government authorities monitor the prevalence of corruption and implement sanctions transparently;
- conflict of interest and ethics rules for public servants are observed and enforced;
- the income and asset declarations of public officials are subject to verification and open to public and media scrutiny;
- senior government officials are immune from prosecution under the law for malfeasance;
- the government provides victims of corruption with adequate mechanisms to pursue their rights;
- the tax administrator implements effective internal audit systems to ensure the accountability of tax collection;
- the executive budget-making process is comprehensive and transparent and subject to meaningful legislative review and scrutiny;
- the government ensures transparency, open-bidding, and effective competition in the awarding of government contracts;
- there are legal and functional protections for whistleblowers, anti-corruption activists, and investigators;
- allegations of corruption at the national and local level are thoroughly investigated and prosecuted without prejudice;
- government is free from excessive bureaucratic regulations, registration requirements, and/or other controls that increase opportunities for corruption;
- citizens have a legal right to information about government operations and can obtain government documents at a nominal cost.
Relationship to Growth & Poverty Reduction
Corruption hinders economic growth by increasing costs, lowering productivity, discouraging investment, reducing confidence in public institutions, limiting the development of small and medium-sized enterprises, weakening systems of public financial management, and undermining investments in health and education. 1 Corruption can also increase poverty by slowing economic growth, skewing government expenditure in favor of the rich and well-connected, concentrating public investment in unproductive projects, promoting a more regressive tax system, siphoning funds away from essential public services, adding a higher level of risk to the investment decisions of low-income individuals, and reinforcing patterns of unequal asset ownership, thereby limiting the ability of the poor to borrow and increase their income. 2
The indicator is an index combining up to 21 different assessments and surveys, depending on availability, each of which receives a different weight, depending on its estimated precision and country coverage. The Control of Corruption indicator draws on data, as applicable, from the Country Policy and Institutional Assessments of the World Bank, the Asian Development Bank and the African Development Bank, the Afrobarometer Survey, the World Bank’s Business Environment and Enterprise Performance Survey, the Bertelsmann Foundation’s Bertelsmann Transformation Index, Freedom House’s Nations in Transit and Countries at the Crossroads reports, Global Insight’s Business Conditions and Risk Indicators, the Economist Intelligence Unit’s Country Risk Service, Transparency International’s Global Corruption Barometer survey, the World Economic Forum’s Global Competitiveness Report, Global Integrity’s Global Integrity Index, the Gallup World Poll, the International Fund for Agricultural Development’s Rural Sector Performance Assessments, the French Government’s Institutional Profiles Database, the Latinobarometro Survey, Political Economic Risk Consultancy’s Corruption in Asia, Political Risk Service’s International Country Risk Guide, Vanderbilt University Americas Barometer Survey, and the Institute for Management and Development’s World Competitiveness Yearbook.
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- 2. Gupta, Sanjeev, Hamid R. Davoodi, and Rosa Alonso-Terme. 2002. Does Corruption Affect Income Inequality and Poverty? Economics of Governance 3: 23-45. Ravallion, M., and S. Chen. 1997. What Can New Survey Data Tell Us About Recent Changes in Distribution and Poverty? World Bank Economic Review 11(2): 357–382Gupta, Sanjeev, Hamid R. Davoodi, and Erwin R. Tiongson. 2001. “Corruption and the Provision of Health Care and Education Services,” in The Political Economy of Corruption, edited by Arvind K. Jain. London: Routledge. Mauro, P. 1998. Corruption and the Composition of Government Expenditure. Journal of Public Economics 69: 263–279. Rajkumar, A.S. and V. Swaroop. 2002: Public Spending and Outcomes: Does. Governance Matter? World Bank Policy Research Working Paper 2840. Anderson, James, Daniel Kaufmann, Francesca Recanatini. 2003. Service Delivery, Poverty and Corruption—Common Threads from Diagnostic Surveys. Background paper for 2004 World Development Report. Washington DC: World Bank. Olken, Benjamin. 2006. Corruption and the Costs of Redistribution: Micro Evidence from Indonesia. Journal of Public Economics 90 (4-5): 853-870.