Thompson, Theresa and Anwar Shah. 2005. Transparency International’s Corruption Perceptions Index: Whose Perceptions Are They Anyway?
In recent years, corruption has become an important issue among a wide audience, including development economists, development institutions, politicians and the general public alike. Along with the realization that the quality of a country’s institutions is crucial to development have come various empirical studies that have used various corruption indices in regressions. The widespread usage of the corruption indices necessitates a closer examination of the reliability of these indicators.
We find that there are many limitations to corruption indicators due to the methodologies used in aggregating or averaging, the reliability of the sources on which they are based, and the varying definitions of corruption utilized. In particular, we find the large standard errors of the aggregate corruption indices problematic. This lack of precision of the scores leads one to question the feasibility of compiling meaningful rankings across countries or trends across time.
The remainder of the paper is organized as follows. The first section of the paper explains the methodology behind one of the more popular indicators, Transparency International’s Corruption Perceptions Index (CPI), as well as its component indicators. The second part describes some limitations of the CPI. The final section makes suggestions for future empirical studies of corruption.
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