The Role of Institutions in the Incidence of Crime and Corruption

There have been very few attempts in the economics literature to empirically study the link between criminal and corrupt behaviour due to lack of data sets on simultaneous information on both types of illegitimate activities. This paper is, to our knowledge, the first in the literature to explore the nexus between crime and corruption, their magnitudes, determinants and their effects on growth rates. The present study uses a large cross country data set containing individual responses to questions on crime and corruption along with information on the respondents’ characteristics. This micro level data is supplemented by country level macro and institutional indicators. A methodological contribution of this study is the estimation of an ordered probit model based on outcomes defined as combinations of crime and bribe victimisation. We find that i) a crime victim is more likely to face bribe demands, ii) males are more likely victims of corruption while females are of serious crime, iii) older individuals and those living in the smaller towns are less exposed to crime and corruption, iv) increasing levels of income and education increase the likelihood of crime and bribe victimisation to be reported and v) a stronger legal system and a happier society reduce both crime and corruption. However, we find no evidence of a strong and uniformly negative impact of either crime or corruption on a country’s growth rate.