Corruption and Confidence in Public Institutions: Evidence from a Global Survey

Abstract

Well-functioning institutions matter for economic development. In order to operate effectively, public institutions must also inspire confidence in those they serve. We use data from the Gallup World Poll, a unique and very large global household survey, to document a quantitatively large and statistically significant negative correlation between corruption and confidence in public institutions. This suggests an important indirect channel through which corruption can inhibit development: by eroding confidence in public institutions. This correlation is robust to the inclusion of a large set of controls for country and respondent-level characteristics. Moreover we show how it can plausibly be interpreted as reflecting at least in part a causal effect from corruption to confidence. Finally, we provide evidence that individuals with low confidence in institutions exhibit low levels of political participation, show increased tolerance for violent means to achieve political ends, and have a greater desire to “vote with their feet” through emigration. JEL classification: D73, O12, O17 Despite considerable debate over definitions, measurement, and methodology, it is widely-accepted among academics and policymakers that well-functioning public institutions play an important role in economic development. In turn, a key ingredient in the effectiveness of public institutions is the confidence that they inspire among those whom they serve. For example, households or firms who do not have confidence in the police or the courts are unlikely to avail themselves of their services, and may resort to other informal means of property protection or dispute resolution. Similarly, if individuals lack confidence in the honesty of the electoral process they are unlikely to vote, leading to low