These initiatives reflect a growing academic and policy consensus that corruption is often
high in low-income countries and that it is costly. The growing policy activism that conditions
international assistance on corruption outcomes in turn reflects a belief that given the right
incentives, politicians, bureaucrats, and civil society in these countries can reduce corruption.
Evaluating these claims requires answers to three questions. The first, and arguably
most basic, question that underlies policy design is, how prevalent is corruption? Second,
what are the costs of corruption (i.e., is corruption actually harmful)? Finally, what factors
influence the level of corrupt behavior? For example, is corrupt behavior responsive
to economic incentives and market forces, and in what ways? Are there other effective
approaches that can be brought to bear on corruption, such as technology, and how might
corrupt officials react to such changes?
In this article we review the literature on these three issues and in each case describe
both what we know and what we do not. We include a wide variety of types of corruption
in our analysis but primarily focus on bribes to government officials and theft of government
resources by public officials.2