It strongly suggests that better governance leads to better development outcomes. If Russia controlled corruption as well as the Czech Republic, or Indonesia as well as Korea, the improvements would about triple per-capita incomes while reducing infant mortality by a similar magnitude and improving literacy by about 20 percent in the long run. If Tajikistan were to acquire Chilean levels of government effectiveness, the resulting improvements would amount to twice those just catalogued. Corruption and misgovernance are devastating for the poor, who routinely receive fewer social services, such as health and education, and have fewer resources to supply the bribes and payoffs that can be routinely demanded. Corrupt regimes often prefer defense contracts over rural health clinics and schools, a policy bias that worsens income distribution and diverts resources from the countryside to the cities.
Bribery also carries with it great costs.
Nor does the business community or society more generally. The costs of such corruption for overall business development are large. Grand corruption poses somewhat different problems. A survey of enterprises shows that in those economies transitioning from communism where grand corruption is more prevalent, the growth and investment rate of enterprises is much smaller, and the security of property rights is seriously impaired. At the same time, for a number of countries in the former Soviet Union, the survey finds that firms that purchased parliamentary laws, presidential decrees and influence in central banks do themselves benefit in the short run, though grand corruption imposes a particularly pernicious social cost on enterprise development.