Corruption and Government Roles

This paper reviews recent advances in the economic literature on corruption in order to put some of this material into a broader analytic perspective. Using widely accepted definition of corruption in the literature, we argue that excessively centralized government structure is one of the ultimate factors that drive high level of corruption. In accordance with existing studies, we found there is ample evidence that corruption reduces economic efficiencies and has significant distributional consequences. In addition, due to widespread criticism of conventional perception-based corruption measures, we develop alternative measure of corruption that allows more fruitful empirical studies. The estimated magnitude of corruption in Korea suggests a number of important policy implications.