In China, at the same time (Kahn makes some interesting observation regarding these two case studies), corruption also seems to not have hampered too much the development and growth of the country. There are macroeconomic explanations for this. The influx of foreign investments was strongly encouraged by the creation of economic zones such as that around Shanghai with preferential conditions for business. Corruption was not an obstacle here, perhaps also because the authorities went to great length to make these areas attracters of foreign capital.

At the same time, one should also point out that the costs that a foreign investor would incur in corruption would sometimes not deter the foreign company because the returns were so extraordinarily high, so that the company could pay off the bribe to the governmental officials and still be left with a significant profit.

All in all, it is difficult to draw a distinct link between corruption and development, especially since history has provided examples when growth occurred despite a reasonably corrupt environment. The correlation does exist between poor economies and growth and corruption in the sense that such an environment does favor acts of corruption.

However, there is substantial evidence that while corruption does not necessarily directly negatively impact development,...

Shleifer, a. And Vishny RW. 1993, Corruption, Quarterly journal of Economics, 108, pp599-617
2. Khan MH. 2002, Corruption and governance in Early Capitalism: World Bank Strategies and their Limitation, in J. Pincus and J. Winters (eds.), Reinventing the world bank, Ithaca, Cornell University Press, Pp. 164-184

3. Meier, G. And Rauch, J. 2000 Chapter 9 Political Economy pp421-454, in Meier G. And Rauch J. Leading Issues in economic development, Oxford, Oxford University Press

4. Krueger a 1974, the political economy of the rent-seeking society, American Economic Review

Shleifer, a. And Vishny RW. 1993, Corruption, Quarterly journal of Economics, 108, pp599-617

Khan MH. 2002, Corruption and governance in Early Capitalism: World Bank Strategies and their Limitation, in J. Pincus and J. Winters (eds.), Reinventing the world bank, Ithaca, Cornell University Press, Pp. 164-184

Meier, G. And Rauch, J. 2000 Chapter 9 Political Economy pp421-454, in Meier G. And Rauch J. Leading Issues in economic development, Oxford, Oxford University Press

Krueger a 1974, the political economy of the rent-seeking society, American Economic Review