Corruption Explained: Why Some Countries Stay Corrupt While Others Stay Clean

I just finished reading a book by Ray Fisman and Miriam A. Golden called Corruption: What Everyone Should Know. The book’s subtitle — what everyone should know — implies that a basic understanding of corruption as a societal phenomenon is something all of us should have in order to fight against it. For this reason, this blog is written in a way that should be understandable even without any economics or social science background.

Most of us have either experienced corruption firsthand or know how such an encounter looks. However, after reading this blog post you should understand how to view corruption as a political, economic, and societal phenomenon. Fisman and Golden introduce an insightful model that helps us view corruption from the perspective of economic development. Whether or not one asks for or pays a bribe depends on individual decisions in a given moment. But then, why are some countries generally corrupt and others not? Who is involved in corruption, and why?

Corruption as a Multiple Equilibrium Phenomenon

Imagine you are driving a car in a country called Corruptia. All of a sudden, a car in front of you turns on a light bar and pulls you over. “I need your driver’s license and registration, please,” an officer says once you roll down the window. You find out you were going 30 km/h over the speed limit. The fine for such a violation is 200 Crp. In a country like Corruptia, 200 Crp is a lot of money, but you agree to pay the fine. Suddenly, the officer looks at you and says: “I think for today I could give you a warning, and it will only cost you 100 Crp… in cash.” You know exactly what she means. You have just been asked to pay a bribe.

You can react in two ways:

1) PAY THE BRIBE

In this scenario the officer’s income just increased by 100 Crp, you saved 100 Crp on the fine, and Corruptia just lost 200 Crp that could have paid for new highways, better hospital equipment, or higher salaries for public servants such as policemen.

2)YOU REFUSE TO PAY THE BRIBE AND REPORT THE OFFICER TO THE APPROPRIATE AUTHORITY

In this case, you trust this corrupt behavior will be punished. You just lost 200 Crp and risk being abused by the officer due to her higher power status. The officer lost 100 Crp and potentially her job. The state just gained 200 Crp for investments like the ones mentioned above and removed one corrupt public official who could have cost the state several thousand Crp in the future.

The Cost–Benefit Analysis of Corrupt Behavior

(p.8)

The first scenario is one where corruption (in this case, bribery) is normalized in society (p. 147). This means that if you run into a police officer, there is a high chance you will not achieve the desired goal (her punishment), you are likely to face unpleasant consequences the next time you are pulled over, and you risk all this just to be the one person in your friend group who refuses to pay a bribe.
Benefits of not paying a bribe = low; Costs (potential risks) = high → you decide to pay the bribe.

In the second scenario, corruption is not seen as prevalent in society (p. 148). You are shocked by the audacity of the officer to ask for a bribe, and you are confident that the authorities responsible for policing such behavior will punish her actions. Plus, it is, after all, unethical to be part of a corrupt transaction, and if you told your friends, they would be disappointed if you acted otherwise.
Benefits of not paying a bribe = high; Costs (potential risks) = low → you decide not to pay a bribe.

The two states of society mentioned above fall 1) left of point B, and 2) right of point B on the curves of the corruption as a multiple equilibrium phenomenon figure shown above.

Why Is This Model Helpful?

The reason why it is useful to look at corruption as a model of equilibrium is that this visualization helps us see two things. Firstly, if corruption can be classified as an equilibrium in a specific country, it implies it is probably difficult to break free from it and move to a different equilibrium. Secondly, in the state of the “corrupt” equilibrium, the status quo is suboptimal (a second-best option - non corrupt equilibrium being first best option) for almost every actor in it. The authors admit that maybe a few well-placed government officials and oligarchs benefit from this system, but even most of the bribe-taking politicians, business owners, and, of course, citizens would be better off in the non-corrupt equilibrium (p. 10).

Who and Why Is Corrupt?

Corruption remains one of the main factors hindering economic growth globally. To demonstrate this, one example the authors use is the disparity in economic growth between Norway and Venezuela over the last 80 years. These countries are comparable because they started with similar income per capita in the 1960s and had comparable oil reserves to help grow their economies. The main difference was that Venezuela had very high levels of corruption, while Norway had exceptionally low levels. By 2015 (just before Venezuela’s economic and political collapse in 2016), Norway’s income per capita was about eight times higher than Venezuela’s (Mauro 1995).

Therefore, it is important to ask the question: If everyone in the corruption equilibrium is worse off, why do all its actors continue to play a part in it? Only by understanding the incentive structures behind people’s decisions to be corrupt can we try to adjust these incentives — making the costs of corrupt behavior higher and the benefits lower — to move into an equilibrium without corruption.

Politicians and Bureaucrats

There are two main reasons for politicians to take bribes. Firstly, it signals to communities that voting for them might bring benefits from the politician’s wealth, while also intimidating potential opposition by showing that corrupt individuals are in charge (this is especially relevant in many African countries). Secondly, state funding of political campaigns is often insufficient to win elections. Therefore, many politicians fund their campaigns from their own pockets. This gives corrupt (wealthier) politicians a competitive advantage over other candidates. (Recent scandals include Brazil (Workers’ Party), Germany (CDU), Hungary, Spain, Portugal, France, Italy, Belgium, and Canada, p. 125).

Furthermore, corrupt politicians tend to appoint corrupt bureaucrats. Corrupt bureaucrats, in turn, do what is in their power to keep their patrons in office (political patronage). This hierarchical interdependence of corrupt politicians and bureaucrats makes it difficult to establish independent anti-corruption authorities (p. 125).

Companies

Companies are stuck in a prisoner’s dilemma: If we don’t offer a bribe, our competitor will — and they will get the government contract for building the new highway instead of us. Furthermore, because everyone expects everyone else to be corrupt, bribes are often offered by companies without bureaucrats or politicians even asking for them. Research shows companies benefit from giving bribes in both the short term and the long term (p. 136).

Ordinary Citizens

Ordinary citizens usually see corruption in their country as one of the major problems. But when grandma needs to see a doctor, they would rather pay a bribe than sacrifice her health for the greater cause of fighting corruption. This is a classic example of a collective action problem and the normalization of behavior otherwise seen as immoral. Once others stop paying, I will too — but until then, I can’t afford not to pay and be left behind.

Three Things You Should KNow About Corruption By Now

In my opinion, the introduction to this way of thinking about corruption should leave you with three main takeaways:

1) Corruption is harmful for everyone except a very few individuals in a corrupt country. The members of a particular corrupt society are usually aware of this issue and would like it to change.

2) Because corruption is a state of equilibrium enforced by many mechanisms described by above, it is challenging to move away from it into a state of a “non-corrupt” equilibrium.

3) All actors contributing to this corruption equilibrium have different incentives to be corrupt, even though they only benefit in the short term and are often aware of its negative long-term consequences.

To conclude, it’s not really an officer’s choice to ask you for a bribe, and it’s not really your choice to pay or refuse. Instead, it is the incentive structures built over time in an economic system that determine the destiny of a Venezuelan versus a Norwegian driver.

Bibliography

Fisman, Ray and Miriam A. Golden, Corruption: What Everyone Needs to Know® (New York, 2017; online edn, What Everyone Needs to Know®, Nov. 2020), http://dx.doi.org/10.1093/wentk/9780190463984.001.0001, accessed 22 Aug. 2025.

Mauro, Paolo. “Corruption and Growth.” The Quarterly Journal of Economics, vol. 110, no. 3, 1995, pp. 681–712. JSTOR, https://doi.org/10.2307/2946696. Accessed 22 Aug. 2025.