As A GRADUATING ECONOMIST WANTING to work for an international institution, I was a bit worried that my job market paper analyzed the relationship between corruption and economic growth in a cross section of countries. I was not sure how places like the World Bank and the International Monetary Fund would react to an unconventional topic that at the time (late 1993) might have been perceived as outside the institutions' areas of interest. I knew that some professionals within the institutions were becoming more interested in political economy, but others preferred a more traditional interpretation of the institutions' mandates, and the internal debate could get pretty heated at times.
Only after I happily began working at the IMF did I realize these institutions did not view corruption as a taboo or irrelevant topic. The World Bank and the IMF were indeed less comfortable discussing corruption openly then than they are today. However, in their operational work they had long faced and addressed-often implicitly-issues related to corruption, to a greater extent than would have been obvious to outside observers. One set of examples relates to the international institutions' traditional support for removing or simplifying "textbook" sources of rents and thus of rent-seeking behavior such as trade restrictions, exchange rate restrictions, multiple currency practices, subsidies, tax exemptions, or customs exemptions. ' Other examples relate to the attention that was paid (particularly in natural resource-rich countries) to limiting extra-budgetary funds and off-balance sheet fiscal transactions, or to the composition of fiscal spending (to promote health and education rather than, say, military expenditures).
What was becoming different in the mid-1990s, however, was the international community's willingness to discuss issues of corruption in an open and transparent manner. This more public stage began in 1996 with well-known speeches by James Wolfensohn, then-president of the World Bank (who talked about "the cancer of corruption") and Michel Camdessus, then-managing director of the IMF. The Board of Governors of the Bretton Woods institutions also requested promotion of good governance in all its aspects-including by ensuring the rule of law, improving the efficiency and accountability of the public sector, and tackling corruption-as essential elements of a framework within which economies can prosper. This stage of the process culminated in 1997 with the issuance (and posting on the institutions' external web sites) of the World Bank's anticorruption strategy and the IMF's guidelines on governance.2 Since then, the World Bank has enhanced its work on governance and corruption in an effort to pursue its mandate to reduce poverty. Under President Wolfowitzs tenure, the World Bank has further emphasized the need to improve governance and fight corruption as crucial elements toward successful development and poverty reduction.3 Across the street, the IMF's role in promoting good governance has also expanded considerably over the past decade, and includes focusing on the transparency of government accounts, the effectiveness of public resource management, and the stability and transparency of the economic and regulatory environment for private sector activity.
On the research front, during the mid-1990s, a number of studies estimating the impact of corruption on economic growth and investment began appearing in scholarly journals.4 With the international community's interest in the topics of governance and corruption, a much broader effort has since been made by researchers-particularly in international institutions-to analyze these issues in a systematic manner. New data sets have been collected and analyzed in creative ways, yielding a host of fascinating analytical results and important policy lessons.
The following is a selective review of the World Bank researchers' contributions to the empirical study and measurement of corruption. …