Social Welfare

6.2 Social Welfare

The damaging effects of corruption on investment and economic growth
are widely recognised. But corruption also has adverse effects on human
development. First, corruption reduces the availability and increases the cost of
basic social services. Access to core social services can be easily restricted with
the intention to make corrupt gains. For instance, a government doctor may
deliberately store away free medicines until he is bribed, a police inspector may
deny a First Information Report to a victim until he is paid a kickback, and a
principal may refuse to admit a child in a school until he is paid under-thecounter.
Since obtaining access to basic public services normally requires an
illegal cash payment, corruption also raises the price of these services.
Second, in addition to a decrease in total government expenditure (due to
tax evasion), corruption also shifts government expenditure from priority social
sector spending to areas, where the opportunities for rent-seeking are greater
and the possibilities for detection are lower. Allocating government funds to a few
large defense contracts or mega-projects may seem more attractive to corrupt
bureaucrats and politicians than spending the same money to build numerous
rural health clinics (Bardhan 1997). Similarly, there may be a temptation to

choose more complex technology (where detecting improper valuation or overinvoicing
is more difficult) than simpler, and more appropriate technology.