Abstract
If the word corruption needs to be defined with the hope that its meaning would gain common acceptance, then one must consider the words coined by Tanzi in 1998. The words read as ?the abuse of power for private benefit.' The point to be considered is that corruption still remains a concept that is struggling to gain the degree and extent of measurement. The latest release undertaken by the Transparency International Corruption Index (year 2004) reveals that no country remains corruption free. All developed countries are as dangerous as the other developing countries located all over the world. If we broadly classify the corruption countries in the developing world, they range from Ethiopia, Sierra Leone, Sudan, and Pakistan through Georgia, the Ivory Coast, and Tajikistan to Chad, Nigeria, Bangladesh and Haiti. When trying to infer the reasons for corruption in these developing countries, the common understanding and claim is that they are poor and in some cases even below poverty line. Merely investigating the direction of the causality will not be beneficial and satisfactory for this paper. Our concern will be rather on analysing the channels through which corruption affects growth. Therefore, we shall first gain a brief insight into what economic theory tells us about the economic relevance of corruption by having a rapid look at the works of the New Institutional Economics.
