to exert critical influence in the shaping of policies and institutions in ways that provide benefits to the contributing private parties at the expense of the broader public welfare, a process akin to the “privatization of public policy.” Such instances of undue influence may not involve the payment of bribes but, on the whole, are conceptually indistinguishable from more conventional forms of corruption involving the abuse of public power for private benefit. The public sector bias in the conventional definitions of corruption may reflect the sense that corruption is more damaging in the context of developing countries, where the claims on scarce resources are more pressing—these countries will often have high levels of poverty and many unmet social needs, including weak institutions—and where the evidence suggests that it is often the government that bears the primary responsibility for its prevalence. As an example, an empirical study by Bhattacharyya and Hodler (2012) shows that higher rents from natural resources lead to a higher level of corruption, but only if the quality of the democratic institutions is relatively poor.

# **_The state as regulator and rationing agent_**

Economists seem to be agreed that an important source of corruption stems from the distributional attributes of the state. For better or for worse, the role of the state in the economy has expanded in a major way over the past century and this has led to the proliferation of benefits under its control and also in the various ways in which the state imposes costs on civil society and the business community. While a large state need not necessarily be associated with higher levels of corruption—the Nordic countries have the highest levels of public spending in the world but are also the least corrupt—it is the case that, at least in principle, the larger the number of interactions between officials and private citizens, the larger the number of _opportunities_ in which the latter may wish to illegally pay for benefits to which they are not entitled, or avoid responsibilities or costs for which they bear an obligation. A recent empirical paper by Fan, Lin and Treisman (2012), using survey data from 80 countries, provides evidence that firms are more likely to report bribery in countries with more government tiers, or with a larger number of local government employees.

In those countries where the state is involved in the distribution of social benefits, but in ways that are not transparent, and which may involve corruption, these will not be equitably distributed and the poor—less able to pay/bribe—will be at a disadvantage. In such cases, the intent of social policy will be distorted and, if the problem is serious enough, perverted.

Governing often translates into the issuing of licenses and permits. From the cradle to the grave, the average citizen has to enter into transactions with some government office or bureaucrat to obtain a birth certificate, to get a passport, to pay taxes, to open up a new business, to drive a car, to register property, to engage in foreign trade, to sell a good or service to the government, to hire an employee, to use the publicly provided health services, to be allowed to build a house, among countless others. The World Bank’s _Doing Business Report_ (DBR) has become an excellent annual compendium of the burdens of business regulation in 183 countries. The picture 12