Reform, corruption, and growth: Why corruption is more devastating in Russia than in China

This article explains why massive political corruption appears to be incompatible with economic growth in Russia but compatible with very rapid economic growth in China. The common assumption is that corruption is bad for economic performance. So how can we explain the puzzling contrast between Russia and China? Is Russia being more severely "punished" for its corruption than China? If so, why? This article demonstrates that three intervening factors-comparative advantage, the organization of corruption, and the nature of rents-determines the impact of corruption on economic performance, and that these factors can explain the divergent outcomes. The article thereby offers an alternative to statist explanations of the Russia-China paradox. (c) 2006 The Regents of the University of California. Published by Elsevier Ltd. All rights reserved.