Public sector corruption and trust in the private sector
Gillanders, RobertORCID: 0000-0001-9462-0005 and Neselevska, Olga
(2017)
Public sector corruption and trust in the private sector.
Journal of International Development
.
ISSN 0954-1748
In this paper we use data from the Afrobarometer surveys to demonstrate that there is an
undesirable spill-over from petty corruption in the public sector to trust in private sector
institutions. Our results show that experiencing bribery in the course of one’s interactions
with the public sector lowers one’s trust in big private corporations, small businesses, and
local traders. This finding holds even when we allow for perceptions of political corruption
to enter the specification. We do not find any significant association between a measure of
interpersonal trust and bribery experience which suggests that our findings with regards to
market institutions are not driven by corruption lowering trust in general. Having to pay a
bribe for household services, which is perhaps the setting most like a private sector
transaction, is the corrupt interaction most strongly associated with the decline in private
sector trust. We find some evidence that the spill-over is larger in democracies than in
non-democratic regimes. Given the importance of trust in market institutions for the
efficient functioning of an economy, our findings thus point to a previously unknown and
potentially substantial cost of corruption and add to the case for anti-corruption efforts.