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Understanding Corruption through a Cross-National Comparison
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is preferred but because of the impossibility in collecting the latter. Corruption is covert behavior, which is impossible to directly observe and the exposed portion is unlikely to reflect the whole. However, it is possible to gauge the level of corruption through perception. CPIs compiled evaluations from three sources: non-residential experts such as risk agencies and country analysts, non-residential business leaders from developing countries, and resident business leaders evaluating their own country
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. The selection of
these three sources contributes to the validity of CPI in three ways. First, businessmen have direct contact with local corruption and therefore a better assessment of general corruption levels. In contrast, public opinions may only reflect hearsay and publicized corrupt cases. Second, combining resident and non-resident businessmen corrects the bias that may only be restricted to outsiders. Third, the assessments from non-residential experts who specialize in these countries further correct the possible short-term or parochial impressions of businessmen.
Explanatory Variables
Wealth
Wealth is measured by GDP per capita from the World Bank. Most of the data are
the average of 2002 and 2003 estimates
17
. The GDP per capita is measured on Purchasing
Parity Power (PPP) terms that take local price levels into consideration, and therefore are valid for cross-national comparison. Furthermore, the influence of income on corruption tends to have declining marginal returns. For example, the effect of a $200 increase in a country of a $300 GDP per capita should have more influence in reducing corruption than in a country with a $20,000 GDP per capita. Therefore, the relationship between income and the level of corruption is logistic rather than linear. It is then necessary to use the logistic transformation of GDP per capita, which measures the influence of the proportional change in GDP per capita on the level of corruption.
Modernization
Modernization is measured by the average GDP growth rates in 2002 and 2003
from the World Bank.
Democracy
The level of democracy is regularly reported by Freedom House (FH). In 2004,
FH provided an index on political rights and civil liberty of 192 countries and 18 related and disputed territories. One shortcoming, as Xin and Rudel (2004) pointed out, was that one of the questions on political rights was on the assessment of corruption and therefore might create a circular relationship. The index used by Xin and Rudel (2004), however, might have over-emphasized party competition and popular participation. The rule of the Conservative Party in Great Britain for nineteen years (1979-1997), or the Grand Coalition of the four major parties in Switzerland that held power throughout the post
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TI: A Short Methodological Note on CPI 2004.
www.transparency.org
.
17
Some data for GDP per capita are obtained from CIA Factbook 2005 when they are not available from
the World Bank, including: Libya, Qatar, United Arab Emirate, Cuba, Myanmar, Suriname, Taiwan, Zimbabwe.
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is preferred but because of the impossibility in collecting the latter. Corruption is covert
behavior, which is impossible to directly observe and the exposed portion is unlikely to
reflect the whole. However, it is possible to gauge the level of corruption through
perception. CPIs compiled evaluations from three sources: non-residential experts such as
risk agencies and country analysts, non-residential business leaders from developing
countries, and resident business leaders evaluating their own country
. The selection of
these three sources contributes to the validity of CPI in three ways. First, businessmen
have direct contact with local corruption and therefore a better assessment of general
corruption levels. In contrast, public opinions may only reflect hearsay and publicized
corrupt cases. Second, combining resident and non-resident businessmen corrects the bias
that may only be restricted to outsiders. Third, the assessments from non-residential
experts who specialize in these countries further correct the possible short-term or
parochial impressions of businessmen.
Explanatory Variables
Wealth
Wealth is measured by GDP per capita from the World Bank. Most of the data are
the average of 2002 and 2003 estimates
. The GDP per capita is measured on Purchasing
Parity Power (PPP) terms that take local price levels into consideration, and therefore are
valid for cross-national comparison. Furthermore, the influence of income on corruption
tends to have declining marginal returns. For example, the effect of a $200 increase in a
country of a $300 GDP per capita should have more influence in reducing corruption than
in a country with a $20,000 GDP per capita. Therefore, the relationship between income
and the level of corruption is logistic rather than linear. It is then necessary to use the
logistic transformation of GDP per capita, which measures the influence of the
proportional change in GDP per capita on the level of corruption.
Modernization
Modernization is measured by the average GDP growth rates in 2002 and 2003
from the World Bank.
Democracy
The level of democracy is regularly reported by Freedom House (FH). In 2004,
FH provided an index on political rights and civil liberty of 192 countries and 18 related
and disputed territories. One shortcoming, as Xin and Rudel (2004) pointed out, was that
one of the questions on political rights was on the assessment of corruption and therefore
might create a circular relationship. The index used by Xin and Rudel (2004), however,
might have over-emphasized party competition and popular participation. The rule of the
Conservative Party in Great Britain for nineteen years (1979-1997), or the Grand
Coalition of the four major parties in Switzerland that held power throughout the post
16
TI: A Short Methodological Note on CPI 2004.
.
17
Some data for GDP per capita are obtained from CIA Factbook 2005 when they are not available from
the World Bank, including: Libya, Qatar, United Arab Emirate, Cuba, Myanmar, Suriname, Taiwan,
Zimbabwe.
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