Wealthier societies are correlated with lower corruption
Institutions matter! That’s the conclusion of “Why Nations Fail.” The influential 2012 book by Daron Acemoglu and James Robinson linked long-run prosperity to integrity in economic and political institutions: good governance, the rule of law and rooting out corruption.
Our chart below bears witness to this linkage. It uses the well-regarded “Corruption Index” compiled by Transparency International, which assesses perceptions of a nation’s public sector. (An important note: a higher value means that a country is in fact less corrupt.)
A 20-point increase to a nation’s corruption index score is associated with a lift to per capita income of at least USD 10,000.
While correlation does not imply causation, many other governance indicators show an equally strong linkage to prosperity. To the extent that many emerging markets have made little progress in recent decades, the middle-income trap might simply be a bad institutions trap.