Corruption and Development Policy (Drawing Upon the Recent Indian Debate)

• Date: 01 August 2015
• DOI: http://doi.org/10.1111/jpet.12126
• Author: PRANAB BARDHAN
• Published date: 01 August 2015

CORRUPTION AND DEVELOPMENT POLICY

(DRAWING UPON THE RECENT INDIAN DEBATE)

PRANAB BARDHAN

University of California

Abstract

There is a substantial theoretical literature now on the fac-

tors determining the incidence of corruption, suggesting

some policies to fight it, but we do not have a great deal

of empirical evidence on the effectiveness of these policies.

This paper is a brief overview, drawing upon some of the

salient features of the literature and with several examples

from the Indian case where corruption has become a major

issue of public debate, to make remarks that may be more

generally relevant for policies in developing countries.

In many poor countries corruption is pervasive and widely presumed to be

very hard to crack. In the face of this the common approach to the prob-

lem has often been either moralist (“only a fundamental change in moral

values and standards in the society can resolve it”) or fatalist (“it’s so bad that

nothing can now be done”). The economists usually take an intermediate ap-

proach, indicating the need for a change in the incentive structure in such

a way that the old adage “honesty is the best policy” becomes meaningful

as a strategic goal, although some economists are aware that monetary in-

centives themselves can sometimes crowd out intrinsic motivations for moral

behavior.

There is a substantial theoretical literature now on the factors determin-

ing the incidence of corruption, suggesting some policies to fight it, but we

do not have a great deal of empirical evidence on the effectiveness of these

policies. In view of the inherent difficulty of carrying out such empirical stud-

ies on the impact of policies on corruption in the real world, there is now

a growing experimental literature using simulation of corrupt transactions

in controlled settings—for a brief survey of this literature, see Abbink and

Pranab Bardhan, Department of Economics, University of California, Berkeley

(bardhan@econ.berkeley.edu).

Received October 5, 2013; Accepted June 13, 2014.

C2014 Wiley Periodicals, Inc.

Journal of Public Economic Theory, 17 (4), 2015, pp. 472–479.

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