Are Larger Countries Really More Corrupt?

Abstract

Or has evidence that government corruption is less severe in small countries been an artifact of sample selection?

Several authors claim to provide evidence that government corruption is less severe in small than in large countries. Knack and Azfar demonstrate that this relationship is an artifact of sample selection.

Most corruption indicators provide ratings only for the countries in which multinational investors have the greatest interest. These tend to include almost all large nations but, among small nations, only those that are well governed.

Knack and Azfar find that the relationship between corruption and country size disappears when one uses either a new corruption indicator with substantially increased country coverage or an alternative corruption indicator that covers all World Bank borrowers without regard to country size.

They also show that the relationship between corruption and trade intensity - a variable strongly related to population - disappears when samples less subject to selection bias are used.

This paper - a product of Regulation and Competition Policy, Development Research Group - is part of a larger effort in the group to identify the determinants of good governance and institutions conducive to long-run economic development. The authors may be contacted at [e-mail] or [e-mail].