In Box

The Lesser Evil?

The Lesser Evil?

It’s pretty well agreed that corruption, any way you slice it, is bad. Unless you slice it between embezzlement and bribery, that is. According to scholars C. Simon Fan, Chen Lin, and Daniel Treisman, there’s a big difference in impact between the two. Bribery discourages business and international investment and leads to mistrust between citizens and their government. But embezzlement, the economists argue in a working paper published by the National Bureau of Economic Research, can actually act as a substitute for wages when officials are underpaid.

Take China, where embezzling public funds is not even technically illegal as long as the official returns the money within three months. Bribery, by contrast, can be punished with a death sentence.

"China’s strategy of tolerating a certain level of embezzlement … effectively serves as an efficiency wage to contain more harmful ways of corruption," argues Fan.

Fostering a healthy culture of embezzlement might not be the best lesson to take from China’s success. But it does show that when cracking down on corruption, it helps to prioritize.