In my last post, I discussed my unsuccessful attempts to track down the source for the widely-cited “$1 trillion in annual bribe payments” figure (other than a 2004 World Bank press release, which referenced an unpublished study without further citation). Several readers were kind enough to direct me to the best published source on the $1 trillion figure: the appendix in a chapter by Daniel Kaufmann in the World Economic Forum’s 2005-2006 Global Competitiveness Report. The chapter addresses most—though perhaps not all—of my concerns.
As to the methodology, Kaufmann’s appendix explains that the strategy was to use existing surveys that asked business for the amount that their firm (or firms like theirs) paid each year as a percentage of sales, as well as surveys that asked households about annual bribe payments as a percentage of household income. These surveys included the 2000 World Bank Enterprise Survey (WBES) (covering 81 countries) and the World Economic Forum’s 2004 Global Competitiveness Survey (104 countries), as well as individual World Bank surveys carried out in several different countries. The researchers then extrapolated to countries not covered in the surveys, and produced a range of estimates under different assumptions and scenarios.
The main concern I raised in my earlier post was the opacity of the methodology used to generate the $1 trillion number; that issue is largely addressed by Kaufmann’s appendix, which – though perhaps not detailed enough to enable replication by an outside researcher – is sufficient to understand the process used to generate the numbers.
My other big complaint about the widely cited press release is that it provided a misleadingly-precise point estimate, rather than a range of plausible values that reflects the inherent uncertainty in the data. Kaufmann’s chapter does not suffer from that problem. Indeed, the methodology he describes is commendable in its exploration of a large number of scenarios, in order to generate a range of possible amounts for annual bribe payments, which, Kaufmann reports, could be as low as $600 million or as high as $1.5 trillion (or more). His concluding paragraph frames this in exactly the right way:
“In summary, based on this exercise, a reasonable range of estimates for annual bribery would appear to be between US$0.6 and well over US$1.5 trillion a year, with a reasonable midpoint being close to US$1 trillion.”
So the main problem here is not so much the original study (though I have some lingering questions about the data reliability and the extrapolation techniques, and I do think it’s not ideal that the actual study has not, to my knowledge, been made available in a form that would allow researchers to attempt replication). The bigger concern is with how this admirably cautious and qualified attempt to quantify annual bribery got translated into the oft-repeated and misleadingly precise “$1 trillion in annual bribes”. I know it’s not that big a deal – after all, as I said in the original post, I doubt anyone’s take on the bribery problem would be that different if the number were $500 million or $1.5 billion. But I do think it’s important to be as clear as possible about what we know and what we don’t know in this area, as in others. Indeed, to my mind the more important punch-line from Kaufmann’s research is not the $1 trillion figure, but rather the magnitude of the uncertainty — which drives home just how little we know, and how hard it is to figure this stuff out.