Does corruption grease or sand the wheels of development? New results based on disaggregated data

The debate over whether corruption “sands” or “greases” the wheels of income growth has generated a substantial empirical literature; the “greases” argument—that corruption may help firms overcome deleterious governmental obstacles—seems to be advancing, recently. However, as virtually all empirical studies in this area depend upon often-criticized aggregate corruption indices, they fail to take account for the multifarious nature of corruption. We revisit the dispute using newer and more nuanced data that allow for disassembly of corruption into a number of specific types. We also improve upon the problem of missing data, afflicting most related studies, with the use of a better imputation method. We find that although certain types of corruption may help “grease” business transactions, evidence in favor of the “sand” hypothesis is stronger.