Adjusting Corruption Perception Index Scores for National Wealth

My post two weeks ago discussed Transparency International’s newly-released 2017 Corruption Perceptions Index (CPI), focusing in particular on an old hobby-horse of mine: the hazards of trying to draw substantive conclusions from year-to-year changes in any individual country’s CPI score. Today I want to continue to discuss the 2017 CPI, with attention to a different issue: the relationship between a country’s wealth and its CPI score. It’s no secret that these variables are highly correlated. Indeed, per capita GDP remains the single strongest predictor of a country’s perceived corruption level, leading some critics to suggest that the CPI doesn’t really measure perceived corruption so much as it measures wealth—penalizing poor countries by portraying them as more corrupt, when in fact their corruption may be due more to their poverty than to deficiencies in their cultures, policies, and institutions.

This criticism isn’t entirely fair. Per capita income is a strong predictor of CPI scores, but they’re far from perfectly correlated. Furthermore, even if it’s true that worse (perceived) corruption is in large measure a product of worse economic conditions, that doesn’t mean there’s a problem with the CPI as such, any more than a measure of infant mortality is flawed because it is highly correlated with per capita income. (And of course because corruption may worsen economic outcomes, the correlation between wealth and CPI scores may be a partial reflection of corruption’s impact, though I doubt there are many who think that this relationship is so strong that the causal arrow runs predominantly from corruption to national wealth rather than from national wealth to perceived corruption.)

Yet the critics do have a point: When we look at the CPI results table, we see a lot of very rich countries clustered at the top, and a lot of very poor countries clustered at the bottom. That’s fine for some purposes, but we might also be interested in seeing which countries have notably higher or lower levels of perceived corruption than we would expect, given their per capita incomes. As a crude first cut at looking into this, I merged the 2017 CPI data table with data from the World Bank on 2016 purchasing-power-adjusted per capita GDP. After dropping the countries that appeared in one dataset but not the other, I had a 167 countries. I then ran a simple regression using CPI as the outcome variable and the natural log of per capita GDP as the sole explanatory variable. (I used the natural log partly to reduce the influence of extreme income outliers, and partly on the logic that the impact of GDP on perceived corruption likely declines at very high levels of income. But I admit it’s something of an arbitrary choice and I encourage others who are interested to play around with the data using alternative functional forms and specifications.)

This single variable, ln per capita GDP, explained about half of the total variance in the data (for stats nerds, the R2 value was about 0.51), meaning that while ln per capita GDP is a very powerful explanatory variable, there’s a lot of variation in the CPI that it doesn’t explain. The more interesting question, to my mind, concerns the countries that notably outperform or underperform the CPI score that one would predict given national wealth. To look into this, I simply ranked the 167 countries in my data by the size of the residuals from the simple regression described above. Here are some of the things that I found: Continue reading

Two Essential Volumes on Corruption

The study of corruption and what to do about it is no longer an academic or policy-studies backwater.  Matthew’s bibliography of corruption-related publications now lists over 6,000 books, articles, and reports and, as his regular updates show (thank you Matthew), the list continues to grow at the rate of some 50 plus per month.  That is the good news.  It is also of the course the bad news.  Few practitioners, and I suspect even academics, can claim to have absorbed the learning in the 6,000 current documents let alone keep up with the outpouring of new works.

For those who can’t , I recommend two recent books: Dan Hough’s Analysing Corruption and Alina Mungui-Pippidi and Michael Johnston’s Transitions to Good Governance: Creating Virtuous Circles of Anti-Corruption.  Both do an excellent job of synthesizing and extending recent scholarship on corruption issues, and both do so in a sophisticated but accessible manner.  Both have the added virtue of being available in reasonably priced paperback editions. Continue reading

The New Corruption Perceptions Index Identifies Countries with Statistically Significant Changes in Perceived Corruption–Should We Credit the Results?

As most readers of this blog are likely aware, last month Transparency International (TI) released the 2017 edition of its important and influential Corruption Perceptions Index (CPI). As usual, the publication of the CPI triggered a fair bit of media coverage, much of it focused on how various countries ranked, and how individual country scores had changed from one year to the next (see, for example, here, here, here, and here).

There’s a lot to say about the most recent CPI—I may devote a post at some point to TI’s interesting decision to focus the press release accompanying the publication of the 2017 CPI less on the index itself than on the connection between (perceived) corruption and a lack of adequate freedom and protections for the media and civil society. But in this preliminary post, I want to take up an issue that regular GAB readers will know has been something of a fixation of mine in past years: the emphasis—in my view mostly misplaced—on how individual country CPI scores have changed from year to year.

In prior posts, I’ve raised a number of related but distinct concerns about the tendency of some commentators—and, more disturbingly, of some policymakers—to attach great significance to whether a country’s CPI score has gone up or down relative to previous years. For one thing, the sources used to construct the CPI for any given country may change from year to year—and adding or dropping an idiosyncratic source can have a substantial effect on the aggregate CPI score. For another, even when the underlying sources don’t change, we don’t know whether those sources are on the same implicit scale from year to year. And even if we put these problems to one side, a focus on changes in the final CPI score can sometimes obscure the statistical uncertainty associated with the estimated CPI—these scores can be noisy enough that changes in scores, even those that seem large, may not be statistically meaningful according to the conventional tests. Although TI always calculates statistical confidence intervals, in prior years these intervals have been buried in hard-to-find Excel spreadsheets, and the changes in CPI scores that TI highlights in its annual press releases haven’t always been statistically significant by TI’s own calculations. In an earlier post, I suggested that at the very least, TI should provide an easy-to-find, easy-to-read table assessing which changes in country scores are statistically significant at conventional levels, preferably over a 4-year period (as 1-year changes are both harder to detect if trends are gradual, and less interesting).

Apparently some folks within TI were thinking along similar lines, and I was pleased to see that in the 2017 CPI includes a reasonably prominent link to a spreadsheet showing those countries for which the 2017 CPI score showed a “statistically significant difference” from that country’s CPI score in each of five comparison years (2012, 2013, 2014, 2015, and 2016).

I’ve still got some criticisms and concerns, which—in the spirit of constructive engagement—I’ll turn to in just a moment. But before getting to that, let me pause to note my admiration for TI as an organization, and in this case its research department in particular, for constantly working to improve both the CPI itself and how it is presented and interpreted. It’s easy for folks like me to criticize—and I’ll continue to do so, in the interests of pushing for further improvements—but it’s much more challenging to absorb the raft of criticisms from so many quarters, sift through them, and invest the necessary time and resources to adapt and adjust from year to year. So, in case any folks at TI are reading this, let me first acknowledge and express my appreciation for how much work (often thankless) goes into the creation and continued improvement of this valuable tool.

Having said that, let me now proceed to raising some comments, questions, and concerns about TI’s claims about countries that appear to have experienced statistically meaningful changes in their CPI scores over the last five years. Continue reading

FIFA’s Faustian Bargain: Corruption for the Cup?

In a Road to Damascus twist, on Tuesday FIFA President Sepp Blatter asked the Swiss government to launch a criminal investigation into corruption related to Qatar being chosen to host the 2022 World Cup. This unprecedented move comes on the heels of a week of backlash to the FIFA Ethics Committee’s final conclusion on the Qatar question: “The potentially problematic facts and circumstances identified by the report concerning the Qatar 2022 bid were, all in all, not suited to compromise the integrity of the 2018/2022 bidding process as a whole.”  These “potentially problematic facts” include a swath of bribes (“improper payments”) paid by Mohamed bin Hamman, a chief supporter of the Qatari bid and former Asian Football Confederation president, which the report concludes were not directly related to securing the Cup, as well as payments by Qatari officials themselves, which made a “negative impression” but did not technically fall afoul of FIFA rules. The Committee’s decision was quickly and repeatedly slammed as a farce, and was followed by strong calls for the investigative report upon which it was based to be made public. Blatter adamantly refused to release the report, which made it all the more surprising when he seemed to go a step further by calling for the Swiss Office of the Attorney General to investigate. Should a criminal investigation proceed, not only would the government’s findings be made public, but corrupt FIFA officials would find themselves facing something entirely new: the pinch of handcuffs rather than a pinch to their finances.

While FIFA lodging the criminal complaint should be applauded, singing halleluiahs over Blatter’s conversion to the church of anticorruption would be a bit premature. In fact, this may be his most strategic move yet.

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The End of a FIFA Fiefdom?

Allegations of corruption have dogged FIFA for years–particularly under the leadership of Sepp Blatter, who has been FIFA President since 1998–but with little impact. The buildup of controversy surrounding the bidding contest for the 2022 World Cup, however, may prove the tipping point in Blatter’s reign. Early last month, Michael Garcia, FIFA’s independent investigator and a former U.S. Attorney, submitted to FIFA’s Ethics Committee a 350-page report on corruption in the 2018 and 2022 World Cup bidding contests. The report purportedly details millions of dollars in bribes paid to FIFA executives in order for Qatar to host the 2022 tournament. A few weeks later, the chairmen of the Ethics Committee released a statement affirming that, in accordance with FIFA’s Code of Ethics, if Garcia initiates proceedings against specific individuals based on his report, only the final decisions (not the report itself or any other preliminary materials) will be made public.

The next day Garcia went rogue. He called publicly for the report’s widespread release (with appropriate redactions as necessary to protect sources). His call was quickly echoed by several members of FIFA’s Executive Committee, including Sunil Gulati, the head of US Soccer, Jordan’s Prince Ali bin al-Hussein, and CONCACAF President Jeffrey Webb. In addition to the revolt that may be brewing within, external pressures are mounting on FIFA as well, with calls for the release of Garcia’s report coming from Michel Platini, head of the Union of European Football Associations (UEFA), as well as U.S. Senator Bob Casey and the international NGO Transparency International. And in Switzerland, where FIFA is based, last April the Federal Council–apparently in direct response to concerns about Swiss-based international sports federations that have been “discredited repeatedly by corruption scandals”–reversed its longstanding position and declared that “private corruption will be prosecuted automatically, even where it does not lead to competitive distortions.”

All this activity is honing in on one specific question, which will likely be definitively answered at the June 2015 FIFA Congress: Will Qatar keep the 2022 World Cup? Continue reading

Allegations of Corruption and the Qatari World Cup

Just five days after FIFA voted to award Qatar the 2022 World CupJack Warner, a senior FIFA official (and now a politician in Trinidad), received $1.2 million from a company controlled by the leading proponent for a Qatari World Cup (the proponent, Mohamed bin Hammam, has since been banned from football for life ). Some have argued that this impropriety should cost Qatar the World Cup, and FIFA has created and empowered an ethics committee to investigate potential wrongdoing. The United States FBI is also investigating the payments. If FIFA finds wrongdoing, it might reassign the cup on that basis.

I believe that to reassign the Cup on the basis of corruption in the FIFA vote would be a mistake. The Qatari World Cup is a magnifying glass on unfair labor practices in Qatar, and the Cup’s potential impact on human and labor rights is too great to give up.

Continue reading