Corruption - the theft of public resources for private gain – imposes large costs on businesses and society. The first type of costs is redistributive. Redistribution costs are incurred whenever business or individuals with more financial or political power abuse their privileged position to gain contracts or services (including regulatory services) at the expense of their competitors. The second type is a welfare cost to the overall economy as a result of corruption, making everyone worse off. Research has only recently started to quantify the various ways in which corruption retards private sector development. We have tried to pull some of these together in a new reading list on measuring the cost of corruption. Let us know if we have missed something.
Update: Corruption and Human Development, from the CATO journal. Also see James Surowiecki.
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