Corruption is widespread in developing and transition countries, not because their people are different from people elsewhere but because conditions are ripe for it. The motivation to earn income is extremely strong, exacerbated by poverty and by low and declining civil service salaries. Furthermore, risks of all kinds (such as illness, accidents, and unemployment) are high in developing countries, and people generally lack the many risk-spreading mechanisms (including insurance and a well-developed labor market) available in wealthier countries. Not only is motivation strong, but opportunities to engage in corruption are numerous. Monopoly rents can be very large in highly regulated economies, and, as noted previously, corruption breeds demand for more regulation. Further, in transition economies, economic rents are particularly large because of the amount of formerly state-owned property that is essentially up for grabs. The discretion of many public officials is also broad in developing and transition countries, and this systemic weakness is exacerbated by poorly defined, ever-changing, and poorly disseminated rules and regulations.

Accountability is typically weak. Political competition and civil liberties are often restricted. Laws and principles of ethics in government are poorly developed, if they exist at all, and the legal institutions charged with enforcing them are ill- prepared for this complex job. The watchdog institutions that provide information on which detection and enforcement is based--such as investigators, accountants, and the press--are also weak. Yet strong investigative powers are critical; because the two parties to a bribe often both benefit, bribery can be extremely difficult to detect. Even if detection is possible, punishments are apt to be mild when corruption is systemic--it is hard to punish one person severely when so many others (often including the "enforcers") are likely to be equally guilty. And the threat of losing one's government job has only a limited deterrent effect when official pay is low.

Finally, certain country-specific factors, such as population size and natural resource wealth, also appear to be positively linked with the prevalence of bribery. (More)