According to the so-called โGrease Theory,โ a certain level of corruption may facilitate market transactions in developing economies where market institutions remain underdeveloped. However, the dominant view in the academic literature is that corruption ultimately hinders economic growth.
By international standards, Korea has long exhibited relatively high levels of corruption. Even in the 1990s, when Korea had already achieved substantial economic development, some transparency indicators placed Korea at levels comparable to those of countries such as Tanzania. Yet Korea managed to sustain rapid economic growth, a phenomenon that cannot be fully explained by the traditional Grease Theory. Using novel measures of corruption based on quasi-tax payments made by private firms, we explore how the close relationship between government and business contributed to the expansion of corporate tax bases.
According to the so-called โGrease Theory,โ a certain level of corruption may facilitate market transactions in developing economies where market institutions remain underdeveloped. However, the dominant view in the academic literature is that corruption ultimately hinders economic growth.
By international standards, Korea has long exhibited relatively high levels of corruption. Even in the 1990s, when Korea had already achieved substantial economic development, some transparency indicators placed Korea at levels comparable to those of countries such as Tanzania. Yet Korea managed to sustain rapid economic growth, a phenomenon that cannot be fully explained by the traditional Grease Theory. Using novel measures of corruption based on quasi-tax payments made by private firms, we explore how the close relationship between government and business contributed to the expansion of corporate tax bases.